Bosnia’s economic outlook dims amid stagnant reforms and rising inflation

Christopher Sheldon, the World Bank Country Manager for Bosnia and Herzegovina and Montenegro, noted that regional economies have been hampered by both geopolitical shocks and entrenched domestic issues. While household consumption remains the primary driver of growth, its momentum is fading. Sheldon warned that private investment and net exports remain sluggish, while inflation has surged across the board, driven by instability in the Middle East and rising costs for food and wages.

Inflationary pressures and labour market fragility

The report details a sharp spike in inflation, which effectively doubled from 2% in 2024 to an average of 4% in 2025. Senior economist Sandra Hlivnjak expressed particular concern regarding "core inflation," which strips out volatile energy and food prices. The rise in this metric suggests that price hikes are now permeating a much broader range of consumer goods. In March of this year, inflation reached 5% compared to the same month in 2025, suggesting the upward trend may continue.

Despite a marginal decline in overall unemployment, youth joblessness remains a critical concern. Hlivnjak described the country's persistent current account deficit as a "chronic economic problem," although she noted that it remains among the lowest in the region.

The cost of political inertia

The World Bank pointed to a worrying lack of progress on the European path. Bosnia and Herzegovina remains the only nation in the region that has failed to draw down funds, neither grants nor loans, from the EU’s Growth Plan. With the country currently in an election year, the reform momentum appears to be waning, leading experts to suggest that growth forecasts may need to be revised further downwards.

Additional pressure is being felt from the Carbon Border Adjustment Mechanism (CBAM). As of 1 January, this carbon tax has applied to electricity exports, potentially threatening a previously reliable source of national revenue.

The World Bank’s message to policymakers is clear: a return to the reform agenda is the only viable route to prosperity. Analysts conclude that Bosnia and Herzegovina requires a growth rate of at least 6% to 7% to achieve meaningful convergence with European Union standards, a significant leap from the 2.1% growth recorded in 2025.