The Executive Board of the International Monetary Fund (IMF) has concluded its 2025 Article IV Consultation with Bosnia and Herzegovina, following discussions held on August 27, 2025. The authorities have agreed to publish the staff report that was prepared for this consultation.
According to the IMF, economic growth in Bosnia and Herzegovina has shown resilience despite ongoing domestic and international challenges. Growth accelerated to 2.5 percent in 2024, up from 2.0 percent in 2023. While political uncertainty affected consumption early in the year, indicators suggest a recovery beginning in the second quarter. The IMF expects growth to moderate slightly to 2.4 percent in 2025 before returning to a potential rate of around 3 percent by 2027, supported by consumption and exports.
Headline inflation fell sharply to an average of 1.7 percent in 2024 but rose again to 2.3 percent by May 2025; core inflation stayed near four percent. The IMF projects inflation will rise further to about 3.8 percent for all of 2025 due mainly to higher imported food prices, then stabilize at two percent over the medium term.
Externally, Bosnia and Herzegovina's position is expected to remain stable through next year, though credit growth is likely to slow somewhat. The current account deficit is projected at about 4.1 percent of GDP for 2025—slightly wider than last year—helped by a rebound in electricity exports after previous droughts and lower oil prices offsetting negative effects from U.S.-imposed tariffs on exports. Gross international reserves stood at €9 billion as of recent estimates, covering nearly seven months of imports—a level described as adequate for maintaining the currency board arrangement.
Private sector credit growth is forecasted to slow down but still exceed nominal GDP growth rates next year.
The outlook remains subject to downside risks such as trade uncertainty, weaker European economies, volatile commodity prices, tighter global financial conditions, or heightened political tensions domestically or abroad. On the other hand, progress toward EU accession could strengthen investor confidence and boost economic performance.
In their assessment following the consultation process with national authorities—a regular engagement under Article IV of its Articles of Agreement—the IMF’s Executive Directors stated: "Executive Directors agreed with the thrust of the staff appraisal. They noted that, while growth has remained resilient amid a challenging domestic and external environment, it continues to fall short of potential, hindering Bosnia and Herzegovina’s swift convergence with the EU."
They continued: "Given elevated downside risks, Directors underscored the importance of maintaining political stability, avoiding policy slippages, and leveraging the EU accession process to accelerate reforms. Continued strong engagement with capacity development partners will be critical to support this process."
Regarding fiscal policy priorities going forward: "Directors concurred that fiscal policy should prioritize medium-term consolidation while rebuilding fiscal buffers, broadening the revenue base, and enhancing the efficiency of public spending." They emphasized avoiding further actions that would widen deficits in coming years.
To reinforce credibility among investors and international partners: "To bolster policy credibility, Directors called for upgraded fiscal frameworks...with greater harmonization and stronger monitoring and enforcement of fiscal rules." This includes reforms related not only to government spending but also oversight mechanisms within public sector employment practices.
On monetary issues: "Directors underscored the importance of safeguarding central bank independence...to preserve credibility" regarding management under a currency board system pegged largely against major currencies like euros.
Financial stability concerns were also addressed: "They called for close monitoring of financial stability risks associated with rapid credit expansion," adding that there should be enhancements made within macroprudential frameworks nationwide—including steps such as creating a country-wide financial stability fund designed specifically for supporting bank restructuring if needed.
Directors highlighted structural reforms as essential under any EU Growth Plan efforts aimed at facilitating accession negotiations—particularly within energy markets where subsidies should be phased out alongside improvements targeting state-owned enterprises’ efficiency levels or new carbon pricing schemes meant both attract private investment capital into key sectors long-term while ensuring competitiveness across European markets generally.
Labor market participation increases; reduced informality; advanced digitalization; better governance structures including anti-corruption initiatives were listed among other necessary reform areas identified during these consultations—with urgency attached especially around implementing MONEYVAL recommendations so as not face grey-listing outcomes that might deter future investments or overall growth prospects moving forward.