Bosnia and Herzegovina needs urgent reforms in order to maintain economic growth and move closer to the European Union, according to the conclusions of the International Monetary Fund (IMF) for this year.
They warned that Bosnia and Herzegovina is facing a slowdown in economic growth, rising inflation and increased fiscal pressures, while without stronger reforms it will not be able to make significant progress towards the economic standard of the European Union.
“Economic growth is weakening under the influence of higher energy prices, weaker demand from the European Union and increased global uncertainty,” stated the IMF.
Economic growth is expected to be two percent this year
According to their estimates, the economic growth of BiH slowed down from 3.2 percent in 2024 to 2.1 percent in 2025, while an additional slowdown to two percent is expected in 2026.
“At the same time, inflation rose from 1.7 percent in 2024 to four percent in 2025, and during this year it could reach 5.4 percent. Growth in the medium term will gradually recover to the level of three percent, but such dynamics will not be sufficient for a significant approximation of living standards to the countries of the European Union without serious structural reforms,” the International Monetary Fund pointed out.
They added that weaker growth of key trading partners, prolonged high energy prices, tighter global financial conditions and political tensions within the country stand out among the main risks.
Fiscal policy remains expansionary
“Fiscal policy continues to remain expansive and contributes to the growth of budget deficits, public debt and inflationary pressures. The consolidated deficit of the general government has been continuously growing since 2022, and according to projections, it could reach four percent of the gross domestic product in 2026. The main reasons are the increase in pensions, social benefits and salaries in the public sector,” it says in these conclusions.
The IMF warned that the increased deficits are being financed by record external borrowing.
“Republika Srpska borrowed a total of 750 million euros, which represents 7.3 percent of the GDP of that entity, while the Federation of Bosnia and Herzegovina secured 800 million euros, or 3.9 percent of its GDP.
That is why the IMF calls on the authorities to refrain from new measures that would further increase the deficit and to use any surplus income for the restoration of fiscal reserves”, the IMF added.
In previous years, they worked on economic blockades
Economist Admir Čavalić says for “Independent newspaper” that this is the correct assessment of the IMF.
“I think this is the result of the fact that in previous years, economic policies of additional regulations, blockades, work bans, inspection terror and the like were worked on. This does not bring results in terms of economic growth,” Čavalic emphasized.
According to him, we should have inclusive policies that will enable dynamism of the market and market relations, which are very important in the context of the economic growth of Bosnia and Herzegovina.
“What does that mean specifically? Well, here, for example, in the Federation of BiH, it is an additional lowering of the collective contribution rate, intensification of the liberalization of financial markets, and so on. Also, these reforms have stopped in the context of joining SEPA, and now we are also on the “grey list”. The last thing is the removal of some institutional barriers that hinder economic growth in BiH, because it makes business more difficult and makes us less attractive as an investment destination,” explained Čavalic.
