The Central Bank of Bosnia and Herzegovina expects moderate growth in economic activity and further weakening of inflationary pressures in the medium term, until 2026, the bank announced today.
After inflation of 6.1 percent last year, inflation is estimated to slow down to a level of 2.6 percent in 2024, according to the latest spring macroeconomic projections of the Central Bank for the period 2024-2026.
In the next two years, further weakening of inflation is expected, to the level of 2.0 percent in 2025, and 1.7 percent in 2026.
The most significant influence on price growth in the coming period is expected to be primarily the prices of electricity, food and transportation, as well as other domestic prices.
Overall inflation is expected to remain lower than core inflation, which excludes food and energy prices.
A slightly higher rate of basic inflation than total inflation implies that domestic prices affect inflation in BiH significantly more than the prices of goods on the international market.
Although inflation is slowing down, in the coming period it will be increasingly influenced by the increase in real wages /7.9 percent annual growth for the first two months of 2024/, due to the increase in the minimum wage, which at the beginning of this year in the Republic of Srpska increased by 28.6 percent. and in the Federation of BiH by 3.9 percent, and the growth of profit margins in numerous activities.
This causes an inflationary spiral and the continuation of a more pronounced increase in unit labor costs, according to the spring macroeconomic projections.
The projection of the growth of economic activity in 2024 compared to the autumn round of projections from 2023 has been corrected upwards, to the level of 2.6 percent.
The projected real annual growth of economic activity of 2.6 percent in 2024 is still below the long-term average, and trends in key macroeconomic variables are unchanged compared to last year’s autumn projections, with the exception of exports, according to the Central Bank.
Real economic growth at the end of the period for which the projections were made is currently projected at 3.3 percent, where the most significant contribution to economic growth is expected from personal consumption due to the growth of nominal wages and the inflow of remittances from abroad.
The share of personal consumption in the total GDP in 2024 is estimated at 67.9 percent and has a slight growth trend in the projection horizon due to the decrease in the share of net exports as a result of lower competitiveness and weaker investment contribution.
The Central Bank emphasized that the assessed and estimated values of GDP and its components, as well as inflation, are exposed to a high degree of uncertainty.
