Fitch reassures Bulgaria, while Borissov constantly threatens Bulgaria with crises

Failure to form a government after the April elections creates an opportunity for political uncertainty to continue, but this will not lead to significant changes in key economic policies. Engagement in prudent fiscal and macro policies, as well as the introduction of the euro, enjoy broad and sustained support, and none of the popular parties fighting the current elite is seeking a change in relations with the EU. “

This is stated in the position of the rating agency “Fitch”, distributed on Tuesday. It is in dissonance with the continuous threats by the resigned Prime Minister Boyko Borissov for the impending crisis after crisis, when his government is replaced by an official one.

Fitch’s assessment, titled “Bulgarian political uncertainty, is unlikely to affect key policies,” also contradicts Borissov’s interpretation of the foggy rise in Bulgaria’s credit rating outlook on February 20. He then explained to Finance Minister Kiril Ananiev that the agency was worried about uncertainty over the outcome of the upcoming elections:

• This is exactly what we are told. In case of any political change – this is what I want the Bulgarians to hear – for them (“Fitch”) the change is uncertainty, because it is elementary to see – when we are, the assessments are stable, positive. , the best. (…) And, this is for me – a “reliable political framework” – of those who say they would make a revolution when they came. With what – I do not know. ”

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Borissov then explained that “unfavorable political developments” in Fitch’s statement literally meant “the current coalition should not rule”, and that the positive and stable outlook for the state was precisely for this coalition with the “patriots”. “Unpretentious” meant that “others come and we stop talking about such things,” and removing him from power would be a mistake and take the state back years.

Fitch now points out that GERB and especially the BSP have lost much of their support, and the result of the April 4 elections is due to “public frustration with traditional parties, fueled by corruption scandals at various levels of government and leading to a series of protests in the past years.”

Here is what is written in the analysis of “Fitch”:

“We still see a small risk of sudden changes in macroeconomic policy, which is why we have changed our perspective. All parties, including those against the status quo, see significant benefits from investment and growth thanks to upcoming EU-funded programs. broad consensus on the adoption of the euro, as well as on fiscal prudence and on maintaining the currency board framework.

In fact, issues of the rule of law, the quality of institutions and corruption have become central to domestic policy, which can help speed up reforms in these areas, entangled in the governance of the outgoing government.

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The governance indicators in Bulgaria correspond to those of other countries in the category of BBB rating, but are the weakest in the EU.

When new elections are called, power will be taken over by a caretaker government with limited powers and no possibility of passing legislative measures in parliament. Prolonged political blockages could delay reforms, including those related to the Next Generation EU (NGEU) reconstruction fund, in which Bulgaria is among the big beneficiaries.

There is still no clarity about the conditions for the distribution of funds (this usually means linking access to money to the rule of law), but the fund is increasingly in focus with the submission to the European Commission of national recovery plans. .

• Fitch believes that EU funds, including transfers from the EU budget for 2021-2027, as well as those from the NGEU, can increase growth from the projected for 2021 3.4% to 4% -5% in 2022-2025 .

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In the absence of clarity on Bulgaria’s capacity to absorb and allocate NGEU funds – which may face institutional, administrative and political constraints – we have not yet assessed whether they would improve long-term growth potential by increasing investment and increasing productivity. .

The weak point of Bulgaria’s rating is its low growth potential. “

Fitch also notes that GERB has failed to form a coalition, even after Borissov said he would not remain prime minister and that sociological forecasts for early elections do not portend any significant improvement in the prospects for forming a government. “As has happened in the past, a multi-party coalition may be unstable,” the agency added.

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