Fitch affirms Bulgaria’s rating with stable outlook

Fitch Ratings has affirmed Bulgaria's Long-term foreign currency Issuer Default Rating (IDR) at 'BBB-', and its Long-term local currency IDR at 'BBB'. The Outlook on both ratings is Stable. The affirmation reflects Bulgaria's successful fiscal consolidation and stable monetary policy and the rebalancing of the economy. However, growth remains weak by 'BBB' range standards, and the risk of contagion from any intensification of the eurozone crisis through trade and financial channels remains material, forestalling any upward momentum in the ratings at present.

Fitch expects the 2012 fiscal budget deficit target of 1.6% of GDP (ESA 95 basis) to be achievable, mainly due to a track record of successful control of expenditure. Fiscal reserve levels fell to around 6% of GDP at end-May 2012, although the reserve will receive a boost following the issuance in July of EUR1bn five-year Eurobonds. The agency does not view the decline in reserves as a stress indicator that in itself puts further negative pressure on the ratings at their current level since the Bulgarian sovereign retains the ability to access markets.