Fitch Ratings said on April 11 it has affirmed Bulgaria’s BBB long-term foreign-currency issuer default rating and the positive outlook, reflecting the prospects for euro adoption.

In February, Bulgaria requested extraordinary convergence reports by the European Commission and the European Central Bank as it has met the Maastricht criteria. It hopes for a positive outcome in June and to become eurozone member as of January 1, 2026.

“Fitch does not expect significant difficulties with the formal approval, given strong political commitment at the EU level. Overall, we consider euro adoption as supportive of the rating,” the rating agency noted in its statement.

Bulgaria’s positive outlook is backed by the country’s strong external and public finance balance sheets versus BBB peers, as well as credible policy framework.

“This is balanced against low labour productivity and unfavourable demographics, which weigh on potential growth and government finances over the long term. There is a recent record of unstable coalition governments, which has affected reform implementation, and the perception of corruption is high,” Fitch noted.

After the October 2024 snap general election, Bulgaria’s Gerb formed a ruling coalition with the pro-Russian Bulgarian Socialist Party (BSP), populist There Are Such People (ITN) and DPS-DPS of Ahmed Dogan.

The government of Prime Minister Rossen Zhelyazkov (from Gerb) has set as its top priorities the entry in the eurozone and reforms under the Recovery and Resilience Facility (RRF) that would unlock second payment.

“Longevity and stability of the coalition will be tested in the near term but successful eurozone entry and progress on RRF-linked reforms could support the government beyond end-2025,” Fitch noted.

The rating agency expects that Bulgaria’s economic growth will reach 3.1% this year thanks to stronger carry-over effect and better internal political situation. Private consumption is also projected to remain strong thanks to wage hikes. For 2026, Fitch expects the economic growth to slow down to 2.8%.

“We remain cautious about the capacity and pace of reform implementation, but EU funds flows should increase and will support investment activity,” Fitch noted.

HICP inflation is expected average 3.9% in 2025, up from 2.6% last year and above the current peer median of 3%.

“The expected increase in inflation should not derail Bulgaria's eurozone entry. We expect inflation to ease to 3% in 2026. However, eurozone entry may accelerate price convergence to the EU average over the medium term,” Fitch noted.

The rating agency expects that Bulgaria’s fiscal deficit will reach 2.7% of GDP this year, slightly down from an estimated 2.8% of GDP last year.

The deficit will be impacted mainly by further increase in public sector wages, deliveries of military equipment (0.5% of GDP) and some revenue-enhancing measures.

“We expect the deficit to narrow to 2.4% in 2026, above the government's target of 2.2%, due to our assumptions of higher defence spending and lower expected EU fund inflows,” Fitch noted.

Bulgaria’s public debt is expected to remain very low compared to that of the other EU member states and among the lowest in the BBB category.  According to Fitch, it would though increase in 2025, to 33.9% of GDP, from 24.1% of GDP in 2024.