Economic Outline

Economic Indicators

Nowadays, Bosnia and Herzegovina is considered an upper-middle-income country, achieving great results since 1995, the year in which the inter-ethnic conflict that destroyed much of the Bosnian economy and infrastructure, increased unemployment and decreased production, came to an end. After growing 1.7% in 2023, an improved EU economic landscape, along with higher private consumption and investment driven by construction activities, contributed to a 2.8% increase in real GDP in 2024, with a similar pace expected for 2025. In 2026, stronger external demand and recovery from flood damages are expected to drive higher output growth (World Bank). However, several structural challenges limit output growth. Productivity is hindered by the large presence of state-owned enterprises, which employ much of the educated labour force. Population ageing, driven by outmigration, also reduces productivity and strains public services, particularly healthcare.

The general government maintained a near-balanced fiscal position in 2022 and 2023, benefiting from stronger-than-expected revenue growth, although planned investments were hindered by administrative and political obstacles. In 2024, significant permanent spending increases (e.g., wages and pensions) contributed to a rise in the fiscal deficit, with additional spending pressures from flood repairs expected in 2025, slowing the reduction of the public debt ratio. According to official governmental figures, Bosnia and Herzegovina's foreign debt reached BAM 9.23 billion (USD 4.95 billion) at the end of 2024. The Federation's external debt rose to BAM 5.08 billion by December, while the Serb Republic's foreign debt increased to BAM 4.06 billion from BAM 3.93 billion. Overall, the debt-to-GDP ratio of the Federation was estimated at around 34.5% at the end of 2024, with an upward trajectory expected over the forecast period. Meanwhile, the annual average inflation stood at 1.4% in 2024, down from 5.1% one year earlier and 14.9% in 2022 (National Statistics Office).

Registered employment growth slowed from 1.4% in 2023 to 0.4% year-on-year in the first eight months of 2024, while the LFS unemployment rate remained just above 13%. Trade and tourism saw the largest employment gains, but ongoing outflows of skilled labour are causing shortages in sectors like construction and healthcare. This is likely to lead to wage pressures outpacing productivity growth, negatively affecting competitiveness (EU Commission data). Despite macroeconomic stability and resilience, real income growth in Bosnia and Herzegovina has averaged only 2% per year from 2009 to 2023, resulting in stagnant living standards. The country’s GDP per capita (PPP) is low, estimated at USD 21,498 in 2024 by the IMF, and real per capita consumption remains at just 40% of the EU27 average.

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