S&P predicts budget deficit growth due to elections: BiH's governance system among the world's most complex

(Patria) - S&P Global Ratings, one of the largest and most influential credit rating agencies in the world, has affirmed the long-term and short-term foreign and local currency credit ratings for Bosnia and Herzegovina at 'B+/B' with stable outlooks, Reuters reported.

The agency predicts that Bosnia and Herzegovina's budget deficits will increase starting in 2026, primarily due to pre-election spending.

S&P forecasts deficits to average 2.1% of GDP by 2029, with general government debt, net of liquid government assets, rising to 25% of GDP by 2029 from an estimated 20% at the end of 2025.

The agency expects limited progress on key reforms related to European Union accession and the Western Balkans Growth Initiative ahead of this year's General Elections. A significant escalation of domestic political tensions during this period remains a key risk.

S&P highlights that Bosnia and Herzegovina's governance system is among the most complex institutional arrangements globally, pointing to repeated secession threats from the Republika Srpska entity in recent years as an example.

The stable outlook reflects S&P's view of solid economic growth and limited external imbalances, balanced by rising fiscal imbalances and limited political effectiveness ahead of the 2026 elections.

S&P notes that it could lower the rating if public finances deteriorate beyond expectations or if domestic political tensions significantly intensify in a way that threatens the basic functioning of the state.

Conversely, S&P could raise the rating if general government deficits remain moderate or if, after the General Elections, there is greater consensus in domestic policymaking that accelerates structural reforms and increases the predictability of the political environment.