S&P Global Ratings has maintained Bosnia and Herzegovina's foreign and local currency sovereign credit ratings at 'B+/B', keeping the outlook steady. The decision reflects a balance between the country's ongoing economic strengths and mounting fiscal and political challenges.
The rating agency expects budget deficits to widen starting in 2026, attributing the change primarily to preelection spending. S&P's projections indicate average deficits of 2.1% of GDP through 2029. It also forecasts that general government debt, when measured net of liquid government assets, will climb to 25% of GDP by 2029 from an estimated 20% at year-end 2025.
S&P noted limited headway on important reforms related to European Union accession and the Western Balkan Growth Initiative in the run-up to general elections this year. The agency singled out the potential for a significant escalation of domestic political tensions as a central risk during this period.
Highlighting the complexity of the country's institutional architecture, S&P described Bosnia and Herzegovina's governance system as among the most intricate in the world. As an example of recurring political strain, the agency pointed to Republika Srpska's repeated threats to secede over recent years.
The stable outlook, S&P said, reflects the combination of solid economic growth and limited external imbalances on one side, and rising fiscal pressures and constrained political effectiveness ahead of the 2026 elections on the other. The agency indicated that either side of this balance could prompt a ratings change.
S&P stated it could downgrade the ratings if public finances deteriorate beyond its current expectations or if domestic political tensions intensify to a degree that jeopardizes the basic functioning of the state. Conversely, the agency said an upgrade would be possible if general government deficits remain moderate or if, after the general elections, a more consensus-based domestic policymaking approach accelerates structural reforms and improves the predictability of the political environment.
Overall, S&P's assessment underscores the interplay between fiscal trajectories and political stability in shaping sovereign creditworthiness for Bosnia and Herzegovina. The outlook hinges on near-term fiscal developments tied to the electoral cycle and the ability of policymakers to sustain reform momentum amid a complex governance landscape.