Bosnia-Herz. Economic Outlook
Year-on-year GDP growth slowed to 1.7% in the fourth quarter, down from 2.6% in Q3. The deceleration was driven by expansions in the construction and service sectors, while manufacturing and agriculture contracted. Looking at Q1 2023, high-frequency indicators suggest a further deceleration. Industrial production contracted at a sharper pace in the quarter relative to Q4, while growth in both merchandise exports and retail sales slowed. More positively, the number of overnight tourist stays increased by 15.4% in January–February from the year-earlier period. In other news, the Federation of Bosnia and Herzegovina formed a new government on April 28, after several months of political gridlock. This is expected to bring more stability, but significant near-term economic benefits are not anticipated.
Inflation came in at 10.3% in March, down from 12.9% in February. Average inflation is set to recede in 2023 as a result of a tough base effect, albeit while remaining at a relatively high level. Unexpected changes in energy and food prices are factors to watch.