Bosnia-Herz. Economic Outlook
Year-on-year GDP growth slowed to 1.7% in the fourth quarter, down from 2.6% in the third quarter. Behind the deceleration were sharper contractions in industry and agriculture. In Q1, data suggests similarly mild growth. Relative to Q4, the expansions in merchandise exports and retail sales slowed, while industrial production continued to contract. In contrast, growth in other services accelerated, and the number of overnight tourist stays in Q1 increased by 16.4% from a year earlier. Turning to Q2, sluggish goods demand from key trading partners is weighing on exports, while a bleak credit outlook and uncertainties around domestic and external demand are likely dampening investment. However, the drop-off of inflation in April bodes well for private consumption.
Inflation came in at 7.9% in April, down from 10.3% in March. Average inflation is set to recede in 2023 due to a tough base effect, albeit remaining relatively high. Unexpected changes in energy and food prices and stickier-than-expected core inflation are factors to watch.