The International Monetary Fund (IMF) issued a statement after consultations with the authorities of Bosnia and Herzegovina, in which they highlighted several data points.
They assessed that the country’s economic growth is resilient despite domestic and global challenges. Namely, it accelerated to 2.5 percent last year. Furthermore, as they pointed out, political uncertainty in the first quarter of this year caused a decrease in consumption and economic growth will slow to 2.4 percent this year. However, they expect that growth by 2027 will be three percent, and they cited consumption and exports as the reason for this.
In terms of the average inflation rate, they stated that it dropped sharply to 1.7 percent last year, noting that the year before it was 6.1 percent. However, that rate increased to 2.3 percent in May this year, while core inflation, as they noted, was largely stable – four percent.
The IMF expects the inflation rate to rise to 3.8 percent this year, citing higher imported food prices as the main reason. However, inflation is likely to stabilize at two percent in the medium term.
When it comes to Bosnia and Herzegovina’s external debt, they emphasized that it is largely unchanged this year. Namely, it is likely to increase slightly from 4.0 percent of gross domestic product (GDP), which it amounted to last year, to 4.1 percent of GDP. They believe that the recovery of electricity exports after last year’s droughts and lower oil prices could mitigate the negative impact of US tariffs on exports.
They highlighted the fact that gross foreign exchange reserves amounted to nine billion euros, which can cover more than six months of imports and which, as assessed by the IMF, is adequate coverage for a currency board arrangement. They assume that private sector credit will decline to 7.7 percent in 2025, slightly higher than nominal GDP growth.
Risks to the economy
They noted that the country’s economic outlook is subject to downside risks. These risks include trade uncertainty, a slowdown in economic growth in Europe, volatile commodity prices, tighter global financial conditions, and continued political tensions.
They reiterated that, as they noted, strong growth in real wages and credit in the private sector could increase inflation. They also looked at potential policy decisions ahead of the 2026 general elections.
“Policy deviations ahead of the 2026 elections could worsen the fiscal position and current account deficit. On the positive side, progress in the EU accession process could increase investor confidence and economic growth,” the IMF said.
