S&P affirms BiH’s B credit rating, worried about RS policy

Standard & Poor’s has affirmed Bosnia and Herzegovina’s B credit rating with a positive outlook, but with the warning that this unfavourable credit status could be jeopardised by the rising political tensions in the country. [Shutterstock / Onchira Wongsiri]

Standard & Poor’s has affirmed Bosnia and Herzegovina’s B credit rating with a positive outlook, but with the warning that this unfavourable credit status could be jeopardised by the rising political tensions in the country. The B rating means that a country’s credit situation is speculative with high credit risk, and it is just one step above the worst rating of C.

The report said that political tensions in Bosnia and Herzegovina (BiH) have escalated on the back of Republika Srpska’s (RS, Serb entity) announcement that it is preparing to withdraw from several state-level (central government) institutions.

It continued that “we expect the confrontation will ultimately de-escalate, with political structures remaining largely unchanged in BiH, but near-term resolution appears unlikely. We consider that persisting uncertainty could negatively affect growth, which we forecast will slow to 2.7% in 2022 from an estimated 6.7% in 2021.”

Furthermore, S&P said that BiH’s net general government debt remains low, at under 30% of GDP, affording fiscal policy space even if some international financial institution (IFI) credit lines are delayed as a result of political developments.

“We affirmed our ‘B’ long-term sovereign credit ratings on BiH. The outlook is stable”, the report concluded.

The S&P analysis says that last year BiH’s economy benefited from strong exports, notably to the EU, where most of the country’s key trade partners are located.

Inflation’s annual average reached 2% in 2021, following a 1.6% deflation in 2020. ”We expect inflation at 4.2% in 2022“, S&P said.

The Moody’s credit rating agency earlier awarded BiH the B3 rating, the worst in that category.

(Željko Trkanjec | EURACTIV.hr)

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