S&P Global Ratings and Fitch Ratings have both raised Bulgaria’s long-term foreign and local currency sovereign credit ratings by one notch to ‘BBB+’, with a stable outlook.
Two of the largest three global credit ratings agencies said in separate statements late on July 10 that their respective rating actions, taken outside their normal ratings calendar, were due to Bulgaria receiving final approval to adopt the euro on January 1 2026.
European Union finance ministers gave their formal approval for Bulgaria joining the euro zone on that date on July 8, with the European Parliament voting overwhelmingly in favour as well, earlier in the day.
Those were the final steps in a process started when the European Central Bank (ECB) and European Commissioned issued in June convergence reports that said Bulgaria met the criteria and was ready to adopt the common European currency at the start of next year.
“In our view, Bulgaria will benefit from the ECB’s credible monetary policy and the monetary union’s well-established capital markets, while residual foreign exchange risk will decline significantly,” S&P Global said, but cautioned that ECB’s policies were likely to align more with the cycles of larger euro zone members rather than smaller economies such as Bulgaria.
The credit rating agency said that going forward, “some EU institutions may continue to comment on the structural reforms needed to address specific shortcomings in the rule of law, particularly because these assessments could be tied to the transfer of EU funds.”
It also noted that “Bulgaria has a record of adhering to the EU’s recommendations and maintaining uncontentious relationships with European institutions.”
For its part, Fitch said that its credit rating now reflected Bulgaria’s euro zone membership. “It will provide the [country] with reserve-currency status, strengthen the monetary policy framework, reduce transaction costs, eliminate exchange-rate risk to corporate and household balance sheets and open up additional external funding options,” Fitch said.
Fitch did lower its economic growth target for Bulgaria this year to 2.8 per cent as part of its latest rating action, down from 3.1 per cent it projected in April, citing “global trade uncertainty.” S&P Global kept its economic growth projection for this year at 2.4 per cent, unchanged from its previous rating action in May.
Moody’s is yet to make a credit ratings change after Bulgaria’s formal approval of euro zone accession, but it already rated the country at ‘Baa1’ with a stable outlook, which is the equivalent of the ‘BBB+’ rating on the scale used by S&P Global and Fitch.
Source: https://sofiaglobe.com/
