The international rating agency Standard and Poor’s (S&P) increased the credit rating of BiH, from ‘B’ to ‘B+’, with a stable outlook.
S&P analysts state in the report that the increase in the credit rating reflects their view of Bosnia and Herzegovina’s economy that 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 upward, from 1 percent to 2 percent. The increase in the credit rating was also influenced by the favorable fiscal position of the consolidated general government, with a forecasted low net debt of the general government 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 revenues until 2026, which is a low level in global comparison. The rating increase is also based on the expectations of the S&P agency that there will be an easing of domestic political confrontations.
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, a new increase in the credit rating may occur in the next year if a sustainable transition to reaching political decisions based on consensus is achieved, which, in the medium term, could accelerate reforms and economic growth. 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.
