Credit ratings of S&P Global Ratings and Moody's Ratings confirm credit rating for BiH, political stalemate represents a risk

(Patria) - International credit rating agencies S&P Global Ratings and Moody’s Ratings have confirmed the credit rating of Bosnia and Herzegovina, with stable outlooks, pointing to the resilience of the domestic economy, but also to growing fiscal and political challenges in the coming period.

S&P Global Ratings has maintained Bosnia and Herzegovina's credit rating at B+ with a stable outlook. According to S&P's estimates, the budget deficit will grow starting this year, primarily as a consequence of pre-election spending. The average budget deficit is expected to be around 2.1% of GDP by 2029, while public debt could rise to approximately 25% of GDP in the same period.

The stable outlook, according to S&P analysts, reflects a balance between solid economic growth and limited external imbalances, against growing fiscal pressures and limited political efficiency ahead of the general elections. The complex institutional framework and political stalemates continue to pose a significant risk to the adoption and implementation of economic policies. The currency board arrangement, which implies a fixed exchange rate of the convertible mark against the euro and provides important political support to the domestic economy, is highlighted as an important factor of stability.

The S&P report also states that limited progress is expected in key reforms related to the European Union accession process and the Western Balkans Growth Initiative in the coming period, especially ahead of the general elections. At the same time, Moody’s Ratings has confirmed Bosnia and Herzegovina's long-term credit rating at B3 with a stable outlook. According to Moody's assessment, limited political cooperation within Bosnia and Herzegovina continues to slow down the adoption of key laws and the implementation of reforms, which negatively affects the efficiency of economic policies. Although political tensions have eased compared to the earlier period, they still represent a significant limiting factor for improving the country's credit profile.

Moody's estimates that Bosnia and Herzegovina's fiscal performance will moderately deteriorate due to increased social spending, but emphasizes that the relatively low level of public debt continues to be an important supporting factor for the credit rating. Total public sector debt is expected to remain favorable compared to countries with similar ratings, despite growing fiscal pressures.

According to Moody's report, Bosnia and Herzegovina's economic growth is expected to remain moderate and largely resilient to political tensions, although structural constraints and the future impact of the European Union's carbon tax mechanism pose challenges to the economy's long-term competitiveness.

The stable outlook from both rating agencies reflects the assessment that the existing political balance, the currency board arrangement, and the low level of public sector debt will enable Bosnia and Herzegovina to maintain its current credit rating in the medium term.