International agency S&P raised Bosnia and Herzegovina's credit rating to 'B+'

(Patria) - International rating agency Standard and Poor's (S&P) raised BiH's credit rating from 'B' to 'B+', with stable outlooks.

S&P analysts state in the report that the increase in credit rating reflects their view of the BiH economy, which has proven resilient despite recent impacts, including the COVID-19 pandemic, several episodes of political instability, and weaker external demand. BiH's real GDP has fully recovered from the pandemic, and based on economic indicators for the first half of 2023, S&P analysts have revised their real GDP growth projections upwards, from 1 percent to 2 percent. The favorable fiscal position of the consolidated general government also contributed to the increase in the credit rating, with projected low general government net debt of 22% of GDP by the end of 2023.

According to analysts' estimates, external debt servicing costs will be kept at an average of 2.5 percent of government revenue until 2026, which is a low level in global comparison. The rating increase is also based on S&P's expectations of a mitigation of domestic political confrontations.

The currency board arrangement, as stated in the report, represents an important economic anchor, and no changes to this arrangement are expected in the future.

According to S&P analysts, a further increase in the credit rating in the next year could occur if a sustainable transition to achieving consensus-based political decisions is achieved, which could accelerate reforms and economic growth in the medium term. On the other hand, a decrease in the credit rating could occur in the event of increased political confrontations, especially if they lead to possible negative implications regarding external debt servicing.