Bosnia and Herzegovina

Heightened political tensions are slowing reforms and progress toward EU accession. Growth has been resilient, but inflation has accelerated recently following a rapid decline in 2024. Fiscal policy in 2025 has turned expansionary, driven by discretionary measures; spending composition has deteriorated. Larger deficits in both entities (FBiH, RS) are expected to be financed mainly through foreign borrowing. The currency board (CBA) coverage ratio continues to rise, and the financial sector remains healthy and profitable amid high household credit growth. Nevertheless, central bank independence is under pressure. Furthermore, large increases in the minimum wage risk undermining competitiveness and encouraging labor market informality.