Fitch Ratings affirmed on June 23 Bulgaria’s long-term foreign and local currency issuer default ratings at BBB and BBB+ respectively with stable outlook.

The country’s short-term rating was affirmed at F3 and the country ceiling at BBB, Fitch said in a statement.

“Bulgaria’s sovereign credit ratings are supported by a macroeconomic policy framework orientated towards sustainable growth,” said Andrew Colquhoun, Fitch analyst for Bulgaria.

Fitch raised Bulgaria’s long-term foreign currency rating to BBB from BBB-, the lowest rung on its investment-grade ladder, after the country elected a new Government in August 2005.

“The coalition that took office following the June 2005 elections has supported the country’s currency board by running a tight fiscal policy, with a surplus of 3.2 per cent of GDP in 2005. Fitch expects a similar surplus this year,” Colquhoun said.

Bulgaria has investment grade ratings also from Moody’s and Standard & Poor’s, which rank the country at Baa3 and BBB respectively.

Bulgaria has shown one of the fastest declines of any country rated by Fitch in the ratio of gross government debt to gross domestic product (GDP) falling to just 30 per cent in 2005, from 68.2 per cent in 2001, owing to its fiscal prudence, Fitch said.

However, Fitch warns of higher exposure of the economy to adverse shocks, owing to Bulgaria’s significant current account gap, projected at more than 12 per cent of GDP for 2006.

Although the current account gap, driven mainly by consumer lending expansion and resultant strong domestic demand, is partly funded by foreign direct investment (FDI) in the country, Bulgaria still needs to maintain a prudent fiscal policy, said Fitch.

FDI in Bulgaria rose to 858.3 million euro in the first four months of 2006, compared to 557.5 million euro for the same period in 2005.

Fitch also praised Bulgarian National Bank’s policy of maintaining close supervision of the system and its measures to constrain credit growth in order to avoid a threat to financial stability.

Bulgaria’s currency board, pegging the lev to the euro, remains the cornerstone of macroeconomic stability, said Fitch.

Fitch forecast that inflation in Bulgaria would moderate to around five per cent next year without materially eroding the country’s international competitiveness given strong productivity and moderate real wage growth.

Fitch said it expected Bulgaria to join the European Union in January 2007 as the authorities address concerns raised by the European Commission, most notably corruption.