Fitch Ratings on December 17 warned that Bulgaria’s political instability could undermine structural reforms, including fiscal adjustments, which could weigh on economic growth.

Prime Minister Rosen Zhelyazkov resigned on December 11 following mass protests over corruption and a botched 2026 budget. Fitch noted that early elections are likely in spring 2026, marking the country’s eighth snap election since 2021.

Despite the political turmoil, Fitch said it does not expect the crisis to affect Bulgaria’s planned accession to the eurozone on January 1, 2026.

Fitch upgraded Bulgaria to ‘BBB+’ in July after the European Council approved its eurozone accession, reflecting positive impacts on reserve-currency flexibility. However, the sovereign rating includes a one-notch negative adjustment to reflect institutional constraints, limited capacity relative to peers and a record of unstable coalition governments.

The agency said Bulgaria’s fiscal position has weakened in recent years due to rising social spending, large public-sector wage increases and delays in reforms, though public debt remains low at below 30% of GDP. Fitch now expects the fiscal deficit to rise to 3.2% in 2026 and 4.3% in 2027, up from 3% in 2025, citing the outgoing government’s failure to implement planned revenue measures and upcoming military equipment purchases.

Economic growth has been supported in 2025 by strong wage growth, frontloaded consumption ahead of euro adoption and robust investment. Fitch raised its 2025 GDP forecast to 3.3% from 3.1% but slightly lowered its 2026–2027 growth outlook to 2.7% from 2.8%, reflecting expected delays in EU-funded projects and continued political uncertainty.

The agency also highlighted slower absorption of EU Recovery and Resilience Facility (RRF) funds as a potential risk to future growth.