The Central Bank of Bosnia and Herzegovina (CBBH) estimates that economic growth in the country remained moderate at the end of 2025, without a significant acceleration at the beginning of this year, while inflation is expected to increase in the coming period, with pronounced risks from the international environment.
According to CBBH estimates, annual growth in real gross domestic product (GDP) in the fourth quarter of 2025 was 2.1 percent, which is at the level of the previous estimate from December.
On an annual basis, GDP growth for 2025 is estimated at 1.9 percent, which is almost identical to the projections from the autumn round of medium-term macroeconomic forecasts.
Economic activity at the end of 2025 was primarily based on domestic consumption, which was reflected in the growth of trade and services. At the same time, industrial production continued to decline on an annual basis, which indicates weaknesses in the real sector, especially under the influence of external factors.
High-frequency data for early 2026 do not indicate a significant acceleration in economic activity. The preliminary estimate of real GDP growth for the first quarter of 2026 is also 2.1 percent.
Growth was predominantly generated in the services sector, while the contribution of the manufacturing industry remains limited due to weak external demand and increased production costs.
The Central Bank states that the short-term outlook for the economy is relatively stable, but warns that in the coming quarters, negative risks could increase, primarily from the international environment. Therefore, the possibility of a downward revision of economic growth projections for 2026 in the next rounds of estimates is not ruled out.
When it comes to inflation, it is estimated that overall inflation in the first quarter of 2026 was 3.5 percent, while core inflation reached 4.2 percent. Similar rates have already been recorded in the first two months of the year, which confirms the continuation of inflationary pressures in the domestic economy.
Compared to previous estimates, overall inflation has been slightly revised downwards, primarily due to the weaker effect of food price increases than previously expected. However, domestic inflationary pressures remain pronounced, especially in certain consumption categories.
A significant increase in prices was recorded in the housing, energy and utilities segment, where prices increased by 7.7 percent in the first two months of the year, with an intensifying growth trend since the end of 2025. On the other hand, clothing and footwear prices continue to have a deflationary effect on overall inflation, recording a decline both annually and at the beginning of 2026.
For the second quarter of 2026, the CBBH expects inflation to accelerate, with overall inflation likely to increase to around 3.9 percent, while core inflation could remain at approximately the same level of 4.2 percent.
Such developments are primarily associated with the increase in energy prices and their spillover to other sectors of the economy.
Based on quarterly estimates, overall inflation in the first half of 2026 could be around 3.7 percent, while core inflation would remain at around 4.2 percent.
The Central Bank specifically emphasizes that there is a significant risk that inflation will be revised upwards in the next round of estimates. Global trends, especially the rise in energy prices, as well as the possible additional spillover of these costs to the prices of goods and services in the country, are highlighted as key factors.
Risks to economic growth and inflation are further amplified by geopolitical developments, including conflicts in the Middle East. These events affect the rise in energy prices, increase the volatility of financial markets and create disruptions in global supply chains, which indirectly affects the economy of BiH.
Additional pressures also come from the eurozone, where the latest projections of the European Central Bank showed a worsening economic outlook. Eurozone inflation for 2026 has been revised upwards, while economic growth projections have been reduced, indicating weaker economic activity and a less favorable external environment for BiH.
Such developments represent an important channel for risk transmission to the domestic economy, given BiH’s strong connection with the European Union market, especially in the trade and investment segments.
The Central Bank states that in this round of estimates, they assumed moderate nominal wage growth, without significant short-term inflation pressures from that segment.
However, the overall outlook remains uncertain, and further developments will depend largely on international economic and political circumstances, the Central Bank of BiH announced.
