Bulgaria’s credit rating upgraded to ’BBB+’ by Fitch

Investing.com -- Fitch Ratings has upgraded Bulgaria’s Long-Term Foreign-Currency Issuer Default Rating to ’BBB+’ from ’BBB’ and raised its Short-Term Foreign-Currency rating to ’F1’ from ’F2’. The outlook on the long-term rating is Stable.

The upgrade follows the European Council’s Economic and Financial Affairs Council’s approval on Monday of Bulgaria’s application to adopt the euro on January 1, 2026. This marks the final step in Bulgaria’s eurozone accession process, after the European Parliament’s approval in early July and the European Council’s endorsement of the European Commission’s positive convergence assessment from early June.

Bulgaria joined the Exchange Rate Mechanism in July 2020 and has since met all convergence and reform criteria. The currency conversion rate has been set at EUR1: BGN1.95583.

Fitch views euro adoption as positive for Bulgaria’s rating, noting it will provide the sovereign with reserve-currency status, strengthen the monetary policy framework, reduce transaction costs, eliminate exchange-rate risk to corporate and household balance sheets, and open additional external funding options. Bulgarian banks will also gain access to the European Central Bank’s liquidity facilities.

The credit rating agency expects Bulgaria’s real GDP growth to remain stable at 2.8% in 2025, supported by strong nominal wage growth and increased consumer spending ahead of eurozone entry. Growth is forecast to moderate to 2.5% in 2026, with potential upside related to euro adoption.

Inflation in Bulgaria eased to 2.9% year-over-year in May, after approaching 4% at the beginning of 2025. Fitch projects inflation to average 3.3% in 2025, above the current peer median of 2.9%, before declining to 2.8% in 2026.

The general government deficit is expected to remain at 3% of GDP in 2025-2026, reflecting increases in public-sector wages and pensions, higher defense spending, and lower expected EU fund inflows.

Despite projected increases, Bulgaria’s public debt ratio will remain very low compared to other EU countries and among the lowest in the ’BBB’ category. Fitch projects public debt to GDP will reach 34.7% in 2029, up from 24.1% in 2024.

The rating agency cited several factors that could lead to a future upgrade, including improved growth potential through structural reforms and enhanced political stability that supports reform implementation.

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