Economic forecast for Bosnia and Herzegovina

17.11.2025

Economic activity in Bosnia and Herzegovina is projected to remain subdued over the forecast period. Real GDP growth is expected to slow to 1.8% in 2025, before picking up modestly to 2.2% in 2026 and 2.5% in 2027, supported mainly by private consumption and somewhat stronger investment. Inflation is forecast to stay elevated in 2025, before easing in 2026-27, while the general government deficit is projected to widen to 2.5% of GDP in 2025 and 3.0% in 2026, before narrowing slightly in 2027. The gross public debt-to-GDP ratio is expected to increase to about 30.5% by 2027. 

Economic activity set to remain subdued over the forecast period 

Economic growth slowed in the first half of 2025, mainly due to weaker export growth amid softening demand in export markets, while private consumption remained the main driver supported by strong real wage gains. Import growth accelerated, reflecting increased domestic demand, and the current account deficit widened as exports weakened, while foreign direct investment inflows remained relatively low. Over the forecast horizon, growth is projected to remain muted overall: private consumption is expected to stay broadly stable, but external demand is projected to remain subdued and price competitiveness to deteriorate due to rapidly rising wages. Stronger investment, supported by lower political tensions and increased EU financial support, is expected to provide a modest boost to growth in 2026 and 2027. 

The labour market is set to remain tight; due to shrinking labour supply 

Registered employment growth turned negative in 2025, with job gains concentrated in trade and tourism and declines in sectors such as mining and agriculture. The number of registered unemployed continued to fall, partly because more people left the labour market, while continued emigration and the outflow of qualified labour point to rising labour shortages in areas such as construction and health. These factors are expected to sustain wage pressures above productivity growth and contribute to a gradual decline in the unemployment rate over 2025-27. 

Inflation is expected to remain elevated 

Inflation accelerated in 2025, driven mainly by higher prices for food, restaurants and hotels, and health services, while strong nominal wage growth added to domestic price pressures. Wage pressures are expected to remain high due to labour market bottlenecks, keeping headline inflation close to 4% in 2025. While low import prices are projected to bring inflation down in 2026 and 2027, domestic pressures are expected to persist, reflecting still-strong wage growth and overdue electricity price adjustments. 

Public finances face additional spending pressures 

The general government deficit increased in 2024 and is expected to widen further in 2025 amid higher wages and social transfers, despite strong revenue growth earlier in the year. Revenue is projected to remain broadly stable as a share of GDP over the forecast horizon, while continued high spending on pensions and social transfers is expected to keep deficits elevated in 2026. Financing constraints are expected to help contain spending increases, allowing the deficit to narrow somewhat in 2027, though limited compliance with EU accounting standards continues to weigh on the accuracy and reliability of public sector data. 

Risks are largely on the upside 

While the direct exposure to the US export market is limited, domestic growth could benefit from reduced political tensions and a better investment climate, potentially enabling access to additional EU financial support tied to investment and reforms. With general elections planned in 2026, public spending could rise markedly, supporting growth but also risking a significantly higher deficit and debt. 

Source: European Commission. European Economic Forecast, Autumn 2025.