International rating agency Standard and Poor’s (S&P) has increased the credit rating outlook from stable to positive, and kept the credit rating of Bosnia and Herzegovina the same, at the level of ‘B’, announced the Central Bank of BiH.
Explaining the increase of the credit rating outlook from stable to positive, the analysts of the Agency say that political stability in BH has improved in recent months, with the timely formation of the state-level government, following the general elections held in October 2022. The positive impulse is the fact that in December 2022, BH was granted a candidate status for EU membership.
S&P analysts expect BH economic growth to slow down in 2023 and reach 1% as a consequence of developments in the key trade partner countries, with the general government net debt being at a low 22% of GDP at the end of 2022, and expected to remain at that level until the end of 2023.
According to the assessment of this Agency’s analysts, the BH economy has shown resistance to recent external shocks such as the COVID-19 pandemic, and the sharp rise in commodity prices due to the Russian-Ukrainian conflict. It is expected that the current account deficit will remain high this year, but it will mostly be financed from the net inflow of foreign direct investments and the capital account surplus.
The currency board arrangement, as stated in the report, is an important economic anchor, and no changes to this arrangement are expected in the future.
According to S&P analysts, there is a possibility that BH’s credit rating will be increased in the next year if the fiscal situation is stable and external imbalances are moderate, despite reduced demand from key trade partners. On the other hand, a reduction in the credit rating may occur in case of intensified political confrontations, especially if they lead to possible negative implications in terms of external debt servicing, the Central Bank of BiH stated.