site.btaFitch Affirms Bulgaria at 'BBB-';Outlook Stable

Fitch Affirms Bulgaria at 'BBB-'; Outlook Stable

Sofia, December 20 (BTA) - Fitch Ratings has affirmed Bulgaria's
Long-term foreign and local currency Issuer Default Ratings
(IDR) at 'BBB-'and 'BBB', respectively. The Outlooks are Stable.
The issue ratings on Bulgaria's senior unsecured foreign and
local currency bonds have also been affirmed at 'BBB-'and 'BBB'
respectively. The Country Ceiling has been affirmed at 'BBB+'
and the Short-term foreign currency IDR at 'F3'.

This is the third time Fitch has affirmed Bulgaria's sovereign
rating after its assessments in January and July, the Finance
Ministry said.

"The Stable Outlook reflects Fitch's assessment that upside and
downside risks to the rating are currently balanced," the credit
rating agency says. The main risk factors that, individually or
collectively, could trigger negative rating action are:

- Significant fiscal slippage that threatens the long-term
sustainability of public finances and pushes Bulgaria's public
debt ratio above the 'BBB' median.

- Re-emergence of instability in the banking sector, which may
increase pressure on government fiscal finances and economic
growth.

- A negative economic shock that causes a material downward
revision in medium-term GDP and inflation prospects.

The main factors that could, individually, or collectively,
trigger positive rating action include:

- Credible fiscal consolidation that supports the long-term
sustainability of public debt dynamics.

- Stronger trend GDP growth and progressive convergence towards
average EU income levels.

- Sustained improvement in institutional governance and
stability of the political environment, which encourages
effective policy making.

Fitch notes that Bulgaria's government will target
expenditure-driven fiscal consolidation for 2015-2017, with the
aim of reducing the headline fiscal deficit by 0.5 percentage
points annually. Fitch also projects a declining fiscal deficit.


Fitch still views the sovereign's relatively low level of
indebtedness, supportive of public finances, as a rating
strength relative to peers, although it is diminishing as the
debt ratio moves higher. The biggest risks to Bulgaria's
debt-to-GDP trajectory include a lack of commitment to fiscal
consolidation or further support for the banking sector, neither
of which are incorporated into our baseline.

Bulgaria's banking sector has stabilised since being targeted by
substantial bank runs in June 2014, the credit rating agency
says. "Fitch considers both the release of depositors' assets of
collapsed Corporate Commercial Bank (Corpbank) on December 4
(unavailable to depositors following the bank's placement under
special supervision in June 2014), and the extension of First
Investment Bank's 900-million-lev credit line to the State until
May 2016, will support banking sector stability at least in the
near term. These events have not proven to be systemic in
nature. On the contrary, Bulgarian banks have continued to
deleverage, increasing liquidity and capital buffers.

"The agency concludes that Bulgaria's economic growth remains
subdued compared with 'BBB' peers. Geopolitical risks from
Russia and Ukraine and a still fragile eurozone recovery, have
led Fitch to significantly revise down Bulgaria's 2015 real GDP
growth forecast to 0.7 per cent from July's 2.5 per cent, after
growth of 1.5 per cent in 2014. Fitch does not expect Bulgaria
to enter a prolonged period of deflation, although it is a
material risk and could potentially hurt fiscal dynamics.
Instead, we expect lower prices to support consumption activity
in 2015, which should provide some inflationary stimulus, albeit
at a very low level given the impact of weaker imported prices
of global commodities."