Forecasts worsening: GDP growth reduced, inflation rising

(Patria) - The projection for gross domestic product (GDP) growth this year has been revised downwards, while inflation has been revised upwards compared to previous data, according to a statement from the Central Bank of BiH.

These figures indicate that the projection for economic activity growth in BiH in 2025 has been revised downwards to 2.0%, due to weakening domestic and external demand, which has affected personal consumption, investments, imports, and exports.

"Partially, these national accounts components are also influenced by the base effect from 2024. Personal consumption is still expected to contribute the most to economic growth in the short term, being the largest macroeconomic aggregate. By the end of the projection horizon, we currently expect a gradual intensification of economic activity and a gradual weakening of inflationary pressures. Due to the lack of official data on GDP according to the expenditure approach for the second quarter of the current year, the latest rapid estimate of real GDP growth for the second quarter (1.9%) was used. A detailed revision of official statistical data on GDP according to the expenditure approach is underway, and revisions of projections in the spring round of 2026 are possible on this basis as well," stated the Central Bank of BiH.

Inflationary pressures strengthened

They added that domestic inflationary pressures have significantly strengthened since the beginning of the year.

"In 2025, we project inflation of 4.1%, which is a upward revision of 0.6 percentage points compared to the spring round of medium-term macroeconomic projections, and is consistent with the latest rapid estimates of inflation in the short term. A gradual weakening of domestic inflationary pressures is expected within the projection horizon. The estimated values of real GDP, its components, and other macroeconomic variables are exposed to an extremely high degree of uncertainty related to economic activity in the main trading partner countries, political situations at the global and local level, as well as possible significant effects of changes in the domestic labor market on the price competitiveness of domestic products and services," explained the Central Bank of BiH.

Economist Admir Čavalić told "Nezavisne novine" that the data show we still have significant inflation, and that the impact of domestic factors and some poor economic policies should not be excluded.

"We see that a lower economic growth rate is projected, which means a slowdown in economic activity. BiH will still have a certain rate of economic growth, but the projections have fallen, which means there is pessimism in the forecasts of the Central Bank of BiH. A number of factors are to blame, both internal and external. Global supply chains are threatened, as is the weakening of the German economy," stated Čavalić.

According to him, it would be ideal to have the factor of economic diplomacy, i.e., to open new markets for BiH companies.

"For many years, we have been stagnating in the demand for new markets. On the other hand, the EU is also looking for new markets in Africa and South America. It is crucial that we look for new markets for our companies. When it comes to the domestic economy, it is necessary to relieve the burden on the economy, especially when we talk about contributions on workers and improving competition," emphasized Čavalić.