The lack of a stable government may delay Bulgaria's entry into the Eurozone

The international rating agency “Fitch Ratings“ (Fitch Ratings) confirmed the long-term credit rating of Bulgaria in foreign and local currency ‘BBB’ with a positive outlook, announced the press center of the Ministry of Finance, BTA reported.

Bulgaria's rating is supported by the country's strong external economic and fiscal position compared to countries with the same rating, the reliable political framework of membership in the European Union (EU) and the long-term functioning of the currency board regime, the Ministry of Finance states.

The positive outlook reflects the prospects for the country's membership in the Eurozone, which would lead to further improvements in the indicators of the country's external position. Despite a delay in the process of adopting the euro after January 2025 and renewed political uncertainty, “Fitch Ratings” notes that there is broad political commitment at local and EU level for the adoption of the euro. All legislative measures that reflect the commitments after entering the Exchange Rate Mechanism II have been adopted. The Central Bank Law was adopted in February 2024.

Regarding the accession of Bulgaria to the Eurozone, by “Fitch Ratings” point out that inflation, according to the Harmonized Index of Consumer Prices (HICP), in the country has decreased significantly, but remains above that of the three best performing EU member states. From “Fitch Ratings“ expect that the country will not meet the price stability criterion in mid-2024. Bulgaria intends to request an assessment of its progress on the convergence criteria in the second half of 2024, which should allow entry into the euro area later in 2025. According to “Fitch Ratings” Bulgaria could fulfill the price stability criterion in the fourth quarter of 2024 at the earliest and depending on the development of inflation in other EU countries.

Bulgaria is expected to meet all other numerical criteria for adopting the euro (public finances, long-term interest rate and exchange rate). However, the lack of a stable government and potentially lengthy coalition talks could delay entry into the eurozone after 2025, the report said. The adoption of the euro is a factor that supports Bulgaria's rating.

In an interview with BTA, the Director of the Department for Europe at the International Monetary Fund (IMF), Alfred Kamer, during the spring meetings of the World Bank and the IMF in Washington, stated that Bulgaria is on the right track to join the Eurozone in 2025, but the budget should not accelerate inflation. Kamer also pointed out that in order to offer better services to its citizens, the government must find a way to secure them, and one of the Fund's proposals in this direction is the introduction of a more progressive tax system and an increase in corporate tax.

At the end of March, the eurozone countries welcomed Bulgaria's progress on the path to the introduction of the euro. In June, Bulgaria expects an assessment of the fulfillment of the conditions for the introduction of the common European currency. The government of Prime Minister Academician Nikolay Denkov stated that it is likely that our country will request an additional assessment in the autumn, because then it is expected to fulfill the last requirement for the amount of inflation. The ambition is for Bulgaria to join the Eurozone from 2025. A few days ago, in an interview with BTA, the governor of the Bulgarian National Bank (BNB), Dimitar Radev, said that joining the single European currency later in 2025 is possible and at this stage a more likely scenario.