The Central Bank of Bosnia and Herzegovina estimates annual growth in real economic activity in the current year at 2.4 percent, which is 0.2 percentage points lower than the April projection, and inflation at 1.8 percent, which is 0.8 percentage points lower than the medium-term projection from the fourth month.
The correction of economic activity was made based on expectations of its slowdown in the last quarter after the effect of the floods, and inflation is partly due to officially published data until September, which indicate stagnation of prices in the overhead costs department, despite increased electricity prices, and an annual decline in prices in the transportation department.
“We expect that the effects of the flood will be expressed on the potential gross domestic product (GDP), and the consequences will exceed the current financial losses in the directly affected areas,” the Central Bank said, adding that they expect transport prices to increase due to the floods, which will also affect food prices.
The estimate of real GDP growth for the next year is 2.6 percent, and for 2026, 2.8 percent.
“Although personal consumption is significantly slowing down due to recent demographic changes, which significantly reduce the working-age population, time and disposable income, in the medium term it is the main driver of economic growth. Personal consumption is expected to be additionally affected by the recent slowdown in economic activity,” the Central Bank points out.
The CBBH states that the largest contribution to price growth in the next two years is expected from administrative costs, i.e. core inflation, primarily the price of electricity and transportation.
Further increases in the price of electricity and transportation may lead to chain increases in the price of services and consumer goods, after which inflation projections could be revised upwards.
