CBBH cuts inflation forecast, economic activity remains moderate

The current estimates do not indicate significant changes in the short-term economic growth outlook, confirming expectations of relatively moderate economic activity in Bosnia and Herzegovina.

“For the third quarter of this year, the CBBH estimates annual real GDP growth at 2.3 percent. Available indicators point to continued relatively moderate economic activity, with risks from the international environment and uncertainty regarding external demand remaining present,” according to the latest flash estimate of GDP for the second and third quarters of 2026 and short-term inflation.

Inflation has been significantly revised downward in this round.

“We currently estimate that headline inflation could stand at 3.7 percent and core inflation at 4.2 percent in the third quarter of this year. The significant downward revision compared with the previous flash estimate is primarily due to the unexpectedly sharp slowdown in headline inflation in June and July 2026, as well as the weaker pass-through of the initial shock from higher transportation and utility costs to other components of consumer prices,” CBBH analysts said.

Year-on-year, food and non-alcoholic beverage prices were lower in June and July, partly due to a base effect. However, they added that the price level of food and non-alcoholic beverages remains relatively high following significant increases in the previous period.

At the same time, the price level of basic food products in BiH does not differ significantly from prices in neighboring countries. Given the high share of food in household consumption, food prices have a significant impact on living costs and living standards.

“We expect inflationary pressures to remain present and significant, particularly external pressures related to energy prices, and estimate that headline and core inflation could reach 4.1 percent in the final quarter of 2026. At the same time, food prices are also expected to rise in the final quarter, with increases being passed on from foreign to domestic markets with a significant time lag,” CBBH analysts added