The political crisis that has lasted for months is causing serious damage to the economy of Bosnia and Herzegovina. This is supported by the recent report from credit rating agency Standard & Poor’s, which warns of a possible decline in creditworthiness. It means that bh. the economy was even more threatened.
Earlier, the international rating agency Standard and Poor’s (S&P) issued an extraordinary assessment of Bosnia and Herzegovina‘s credit rating, which it is conducting in most countries due to the crisis caused by the coronavirus pandemic. COVID-19 viruses. Compared to the regular assessment in early March, the ‘B’ rating remained unchanged, while the outlook was revised from positive to stable.
Given the global nature of the pandemic, as well as the challenges it poses to health, economic and financial systems in the environment and around the world, maintaining the same rating and associated outlook means that the measures taken in Bosnia and Herzegovina should contribute significantly to mitigate the negative effects of the pandemic.
According to analysts of this agency, the global pandemic caused by COVID-19 will affect the BH economy directly and through foreign trade channels. S&P expects real GDP in 2020 to decline by 5% and BH’s fiscal and external outlook to also deteriorate. Economic recovery is expected in 2021.
The rating could also be upgraded over the next 12 months if the economic recovery is stronger or faster than expected, and the domestic policymaking climate improves. First, it would be desirable to see less confrontational and more consensual policies, oriented towards structural reforms and stronger support for economic growth.
According to S&P analysts, Bosnia and Herzegovina’s credit rating could be improved if domestic political discussions and activities focus more on promoting economic growth and structural reforms, with a higher level of agreement and less confrontation. A program with the International Monetary Fund (IMF) would make a significant contribution in this regard. Stronger than expected economic growth would also contribute to an increase in credit rating.
On the other hand, analysts say a credit rating downgrade could occur if the economic and fiscal costs of a pandemic are higher than currently expected “and if, in a hypothetical scenario, the stability of the domestic financial system weakens significantly in the event of a sustained deterioration in asset quality and currency conversion deposits.”