Rating Agencies: S&P Global Ratings and Moody's Ratings Confirmed the Credit Rating for BH

The international credit rating agencies S&P Global Ratings and Moody's Ratings confirmed the credit rating of Bosnia and Herzegovina, with a stable outlook, indicating the resilience of the domestic economy, but also the growing fiscal and political challenges in the coming period.

The agency S&P Global Ratings maintained the credit rating of Bosnia and Herzegovina at the level of B+ with a stable outlook. According to S&P estimates, the budget deficit will grow starting this year, primarily as a result 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 general elections. The complex institutional framework and political deadlocks continue to represent a significant risk for the adoption and implementation of economic policies. An important factor of stability is the arrangement of the currency board, which implies a fixed exchange rate of the convertible mark against the euro and provides important political support to the domestic economy.

The S&P report also states that in the coming period, limited progress is expected in key reforms related to the process of accession to the European Union and the Initiative for the Growth of the Western Balkans, especially on the eve of the general elections.

At the same time, Moody's Ratings confirmed the long-term credit rating of Bosnia and Herzegovina at level 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 effectiveness of economic policies. Although political tensions have weakened compared to the previous period, they still represent a significant limiting factor for improving the country's credit profile.

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

According to Moody's report, economic growth in Bosnia and Herzegovina should remain moderate and largely resistant to political tensions, although structural constraints and the future impact of the European Union Carbon Border Adjustment Mechanism pose challenges for the long-term competitiveness of the economy.

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