S&P: BiH retains B+ credit rating, but political instability poses risk

S&P, which has been rating BiH since 2008, published its assessment via the Central Bank of Bosnia and Herzegovina. The agency forecasts that the budget deficit will average below 1% of GDP between 2025 and 2028.

This will help stabilise the general government’s net debt at 21% of GDP by 2028.

Additionally, nearly 60% of the consolidated gross debt of the general government is held by official bilateral and multilateral creditors, with long maturities and favourable interest rates.

As a result, S&P analysts expect that debt servicing costs will remain limited, averaging just 2.6% of government revenues, a figure considered low by global standards.

S&P analysts believe that Bosnia and Herzegovina's economic growth remains sluggish due to weak demand from its main trading partners in the EU, and they expect a modest real growth rate of 2.5% this year, followed by a slight recovery from 2026 onwards.

Current account deficits are expected to remain low over the next four years, averaging just above 3% of GDP.

The currency board arrangement, i.e. the fixed exchange rate pegged to the euro, is still regarded as an important policy anchor for the local economy.

According to the Central Bank, S&P could downgrade Bosnia and Herzegovina's credit rating if political and institutional risks escalate, potentially threatening the basic functioning of the state or undermining the government’s ability to service its debt.

On the other hand, the rating could be upgraded if consensus-based policymaking accelerates structural reforms, including those linked to the country's EU accession process.

Since 2004, Bosnia and Herzegovina's credit rating has also been regularly assessed by the Moody's agency, which currently assigns a rating of B3, likewise with a stable outlook, based on its methodology.