Fitch Ratings has affirmed Bulgaria's Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 'BBB-' with a Stable Outlooks. The Country Ceiling has been affirmed at 'BBB+' and the Short-Term Foreign and Local Currency IDRs at 'F3'.

In positive terms, Bulgaria's ratings are supported by its sound public finances and favourable and improving external finances. However, the assessment sees as a constraint the unstable government policy outlook, potentially holding back effective structural reform. This reform is needed to boost long-term potential growth and raise GDP per capita levels in line with similar and higher rated peers.    

Fitch forecasts average real GDP growth of 2.8% for 2017-2018, revised up from 2.4% six months ago. This outlook of higher growth above its current five-year average of 1.8%, suggests progress in convergence towards GDP per capita levels of higher rated peers.    

The budget outperformance in 2016 is favourable and Fitch now expects a deficit of 0.9% of GDP (ESA 2010) against the original government's target deficit of 1.9%.

Bulgaria's rating is further supported by its favourable external finances. Sustained current account surpluses in recent years and high level of foreign reserve assets provide stability to the country's existing currency board regime.

Fitch mentions the main factors that could, individually or collectively, trigger positive rating action. These are a stronger potential GDP growth and progressive convergence; sustained improvement in Bulgaria's external finances; fiscal consolidation that supports stability in public finances. According to the Agency, the main risk factors that, individually or collectively, could trigger negative rating action are: materialisation of contingent liabilities on the sovereign's balance sheet from state-owned enterprises and/or banking sector and higher fiscal deficits that result in a rapid deterioration of the public debt trajectory.

You can read the full text of Fitch's press release here.