Bosnia and Herzegovina: Numerous risks drivers weighing on growth

Erste Bank Research Team Erste Bank

Growth slowed to 1.8% y/y on average after 1H25. Due to ongoing major statistical revision, we only have the detailed expenditure structure available for Q1, while detailed figures for Q2 and Q3 won’t be available before the end of the year.

Looking ahead, we expect a pick-up in growth over the forecasted period, although risks are to the downside. Domestic demand should still account for the biggest part of growth, owing to robust wage and credit growth, expected easing of inflation pressure, decreasing global geopolitical tensions and accelerated investments once the country manages to unlock WB growth funding. Risks are still plentiful, while the expected start of EU’s carbon border tax in 2026 adds another topic to the list.

Inflation has been low and stable in 2024, averaging 1.7% y/y, while peaking at just 2.2% y/y in December. In 2025, inflationary pressures have strengthened as food, electricity, and service prices have continued to climb. The increase in the minimum wage implemented in January 2025 has added further momentum to rising prices.

General government budget gap rose from 1.2% of GDP to 1.8% of GDP in 2024. In 2025, despite solid revenue growth in early year, notably higher wage and social transfer bill is expected to push the gap towards 2.5% of GDP. We expect the gap to remain relatively elevated next year given the usual pre-election spending cycle.

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Erste Bank Research Team

Erste Bank

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