World Bank Lowers Bosnia and Herzegovina's 2025 GDP Growth Forecast to 2.6%

World Bank Revises 2025 Growth Projections

The World Bank has announced a downward revision of Bosnia and Herzegovina's Gross Domestic Product (GDP) growth projection for 2025, setting it at 2.6%. This figure represents a 0.1 percentage point decrease from the institution's previous spring forecast. The adjustment was part of the latest Western Balkans Regular Economic Report, which also included revised forecasts for the broader region.

Beyond 2025, the World Bank also trimmed its outlook for Bosnia and Herzegovina's economic expansion in subsequent years. The GDP growth projection for 2026 was cut by 0.1 percentage point to 3.0%, and for 2027, it saw a 0.3 percentage point reduction to 3.2%.

Factors Influencing the Downgrade

Several factors were cited by the World Bank as contributing to the revised outlook. These include persistent political instability, which has hindered reform efforts, along with rising prices and broader global uncertainty. The report highlighted that Bosnia and Herzegovina's GDP growth decelerated to 1.7% in the first quarter of this year, a notable drop from 3% a year earlier, primarily driven by a slowdown in industrial production, particularly within the manufacturing sector.

Christopher Sheldon, World Bank Country Manager for Bosnia and Montenegro, commented on the situation, stating, 'Bosnia and Herzegovina faces real challenges, from political instability slowing reforms to rising prices and global uncertainty. While consumption continues to support growth in the short term, lasting progress will depend on stronger investment, quality jobs, and steady reforms, especially as the country moves toward EU integration.' The country's economic vulnerability remains a concern, with approximately 40% of adults reportedly unable to cover expenses for more than a month without their primary income.

Regional Context and Future Outlook

The economic challenges faced by Bosnia and Herzegovina are part of a broader trend across the Western Balkans. The collective economic growth for the region, which includes Albania, Kosovo, Montenegro, North Macedonia, and Serbia, is now forecast at 3.0% in 2025, a 0.2 percentage point reduction from prior projections. Growth is anticipated to accelerate to 3.1% in 2026 and 3.6% in 2027, supported by an easing of global uncertainty.

The World Bank emphasized the critical need for structural reforms and closer economic integration to sustain growth momentum in the region. Xiaoqing Yu, World Bank Division Director for the Western Balkans, underscored the importance of job strategies, stating, 'To help the region become a modern economy, it's important to rethink jobs strategies – such as encouraging greater labor market participation, improving skills of the population, and boosting firms through digital upgrades.' The report also pointed to a paradox in the labor market, where shortages persist despite high unemployment rates and low labor force participation, particularly among women, youth, and older adults. Real income growth in Bosnia and Herzegovina has averaged just 3% per year since 2015, with per capita GDP standing at one-third of the EU average in 2024.