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Bulgaria meets all nominal convergence criteria for adopting the euro except for price stability, according to a report by Fitch Ratings

by AI | 21.Oct 2024 | Europe in brief AI

According to the rating agency, there is a broad political commitment at the national and European levels for membership in the eurozone.

photo: Milena Stoykova/BTA

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SOFIA – The international rating agency Fitch Ratings has affirmed Bulgaria’s long-term foreign and local currency credit rating at ‘BBB’ with a positive outlook. The positive outlook reflects the country’s prospects for eurozone membership, which would lead to further improvements in its external position indicators. Fitch Ratings believes there is a broad political commitment at both the national and European level to adopt the euro, according to the press office of the Bulgarian Ministry of Finance.

Bulgaria meets all nominal convergence criteria for euro adoption, except for price stability, according to the Fitch Ratings report. Inflation in Bulgaria continued to decline, narrowing the gap between the country’s average annual inflation and that of the three best-performing EU member states.

Fitch Ratings forecasts that the average annual inflation will be 3% in 2024, 3.5% in 2025, and 3.1% in 2026. Gross domestic product (GDP) growth is expected to be 2% in 2024 compared to 1.8% in 2023, supported by stable private consumption and resilient investment activity, despite increased political uncertainty and delays in the implementation of the Recovery and Resilience Plan. The rating agency expects GDP growth to reach 2.5% in 2025 and 2.7% in 2026.

Bulgaria’s rating is supported by the country’s strong external and fiscal position compared to peer-rated states, a reliable political framework from EU membership, and the long-standing functioning of the currency board regime. Additionally, Fitch Ratings notes that low labor productivity and adverse demographics have a deterrent effect on potential growth and the stability of public finances in the long term.

Bulgaria will request an extraordinary report on its readiness for the eurozone once the last condition is met. This was confirmed by Acting Prime Minister Dimitar Glavchev to Bulgarian journalists in Brussels on October 16. As soon as the fourth criterion for price stability is met, extraordinary reports will be immediately requested. We hope to meet this criterion by the end of the year, Glavchev said.

In August, the National Assembly finally adopted the Bill for the introduction of the euro in Bulgaria. It states that the specific date of the euro introduction and the official exchange rate of the lev to the euro will be determined by the Council of the European Union with a unanimous decision of the member states whose monetary unit is the euro, and Bulgaria. (October 19)

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