Based on available official statistical data and information from international markets published until December 12, 2022, the Central Bank of Bosnia and Herzegovina (CBBH) projects the annual
growth of real economic activity in the third quarter of 2022 at 4.0 percent.
Our preliminary estimate is that economic activity will slow down considerably in the last quarter of the current year, to a rate of 2.9 percent on an annual basis, due to the decrease in the number of orders from abroad, and high inflation.
According to the projection from our medium-term macroeconomic model for Bosnia and Herzegovina from November, the projected growth of real GDP in 2022 is 4.1 percent, which is very much in line with the latest results of the model for the nowcast of current economic activity.
Based on official data from October 2022, as well as data on expected trends of exogenous variables such as food and oil prices, as well as domestic and foreign economic activity in the coming period, annual inflation is expected to be very high in the fourth quarter as well (15.9 percent), but still somewhat lower compared to the third quarter of the current year.
According to the latest results of the nowcast model for current inflation, the projected annual inflation in 2022 could be
around 14.0 percent, which is almost identical to our earlier nowcast from September, but also consistent with the inflation projection for 2022 according to the medium-term macroeconomic model from November (14.4 percent).
A further slowdown in inflation is expected in the first half of next year, primarily due to the base effect from 2022, and the effects of the already changed and announced monetary policies of the leading central banks. Despite the expected slowdown in inflation in 2023, it will still be significantly above the multi-year average for BH.
Electricity prices on the domestic market may have a significant impact on inflation in the coming year, which, according to official data for the first ten months of 2022, even fell slightly compared to the same period in 2021 (a drop of 0.5 percent).
In the inflation nowcast, we have, to a certain extent, calibrated the housing, water, electricity, gas and other fuels price subsection, based on the available information on the possible increase in electricity prices for domestic consumers. However, in FBH there is still no official request for a price correction, therefore, the estimated direct effect is incomplete.
“Currently, we do not have information on the basis on which we would assess the effect of a possible increase in the domestic market electricity prices on goods and services, produced and provided in the country, which is certainly an important factor when estimating inflation. Due to all of the above, there is a possibility that inflation will be slightly
higher compared to the projections,” announced the CBBH.
