Fitch keeps Bulgaria’s credit rating at investment grade BBB–
Credit ratings agency Fitch has affirmed Bulgaria’s long-term foreign-currency credit rating at ‘BBB–‘ with a stable outlook, while the long-term local-currency rating was kept at ‘BBB’, on December 4.
Fitch is the only one of the three major international ratings agencies to rate Bulgaria’s creditworthiness as investment grade, with Moody’s Investors Service and Standard&Poor’s rating the country at Baa2 and BB+, respectively.
Fitch said that Bulgaria had a ” stronger external finances relative to its ‘BBB’ range peers”, while the current account surplus and high level of foreign reserves provided stability to the currency board, but public debt had been “pushed closer to the BBB median” after having to borrow money last year to help the state deposit guarantee fund pay off depositors in the Corporate Commercial Bank (CCB).
CCBs insolvency highlighted the weaknesses in the governance and supervision of Bulgaria’s banks. Although the implementation of EU’s bank recovery and resolution directive reduced the scope of state support, the possibility of further state support for banks remained “a potential risk to the sovereign balance sheet”, Fitch said.
Bulgaria’s economy performed beyond the credit agency’s expectations in 2015, Fitch said, revising its growth forecast to 2.5 per cent from 1.2 per cent in June. For 2016 and 2017, economic growth is estimated to average 2.6 per cent.
Fitch said that it could raise Bulgaria’s ratings in case of “credible fiscal consolidation” and “sustained improvement in institutional governance”, as well as stronger economic growth. On the downside, “higher fiscal deficits than projected”, a “persistent shortfall in economic growth relative to peers” or renewed instability in the banking sector could result in a ratings downgrade.
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