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Fitch has affirmed Bulgaria at 'BBB', outlook positive

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Fitch Ratings has affirmed Bulgaria's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB' with a Positive Outlook.

Bulgaria's ratings are supported by its strong external and public balance sheets versus 'BBB' peers and credible policy framework, underpinned by EU membership and a long-standing currency board. The Positive Outlook reflects the prospects for euro adoption, which would lead to further improvement in external metrics. (…) This is balanced by low level of investments/GDP and unfavourable demographics, which weigh on potential growth and government finances over the long term. (…) Bulgaria's HICP inflation is easing but remains significantly above that of the three best performing EU member states, and it does not currently comply with the price stability criterion. Given considerable uncertainty about the inflation trajectory, it remains questionable whether Bulgaria will meet the price stability criterion in mid-2024 (the key date for 2025 euro adoption).

Bulgaria is on course to meet all other euro-adoption nominal criteria (public finances, interest rate and exchange rate). Overall, we consider euro adoption as supportive to the rating, as all else equal, the output of Fitch's proprietary Sovereign Rating Model (SRM) would improve by around two notches, Fitch Ratings states.

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