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Bosnia a. H. Watch: 2023 inflation in line with expectations (6.1% yoy)
The last release of inflation data confirmed our expectations of a general disinflation trend, mostly driven by the energy segment. The average inflation rate for 2023 (+6.1% yoy) was more than halved vs 2022 (+14.0% yoy), almost matching our projection (+6.3% yoy).
The base effect and energy segment determined overall CPI
During 2023, inflation in B&H recorded a decelerated trend throughout almost all months with just two outliers - August and December - due to energy prices decreasing at a slightly slower pace in these months. In general, after the strongest inflationary hit in 2022, with the average inflation rate reaching a record high level of +14.0% yoy, 2023 brought less than half of this value with an average inflation rate of +6.1% yoy.
Behind this general deceleration trend, the pivotal role was the energy segment (-4.0% yoy) followed by clothing and footwear (-6.0% yoy). On the other side, inflation kept certain level of resistance in food segment (+10.6% yoy), household maintenance (+9.3% yoy), housing (+7.4% yoy) and recreation&culture (+7.2% yoy), but these rates were significantly lower in comparison with rates in 2022 supporting the overall impression of slowdown (for instance, food segment reported inflation rate of +21.4% yoy and housing +14% yoy in 2022).
It is important to underscore that the decelerated inflation trend was primarily the consequence of high base effects and global price trends, implying the fact that State and Entity level governments have not introduced measures that would be characterized as significant anti-inflationary measures (such as differentiated VAT rate and reduced excise duty).
Inflation is expected to stabilize in 2024-2025
For the next period, we expect new challenges and price pressure arising from the new wave of electricity price increases introduced for legal entities (+20% yoy). At the same time, household electricity prices were kept at the same level as in 2023. The spillover effect of the mentioned electricity price increase for legal entities could be a new round of general price increases especially in service segments, and potentially an increase in utilities (heating).
Bosnia and Herzegovina has already gone through a challenging period with record-high prices putting considerable pressure on the economy. Therefore, in the forthcoming period, it will be crucial to maintain the current level of price stability, based on which we believe that inflation will hover around 3% yoy on average in 2024, which is still significantly above the average inflation level our country is used to (0.7% yoy 10Y avg, excl. 2022), before finally settling at 2-2.5% yoy in 2025.
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Ivona ZAMETICA
Bosnia Herzegovina Ivona Zametica has established B&H Research Team within Raiffeisen BANK d.d. Bosnia and Herzegovina back in March 2010. She graduated at Economic Faculty of Zagreb in Macroeconomics and Finance and further deepened her knowledge through the Master degree program in Advanced Financial Management and Markets. She has been among top 3 forecasters for economic indicators of B&H in Focus Economics pool in the past four years and granted the award as the best overall forecaster for 2021. She has been further deepening her knowledge about the Financial Markets and Investment Banking in several projects and transactions of the Bank and being part of the Working Group supporting establishing the local DCM market in B&H. She has been also author of several research papers and studies related to currency board in B&H, government debt management and access to finance of SME’s in B&H. Apart from current coverage of B&H market and interest in SEE and CEE region, she has been particularly interested in monetary policy and recent technological impacts on future of monetary policy and currencies. Ivona is passionate yoga practitioner while in the free time she enjoys the most with her family and friends in travelling, hiking while dancing, theater and music are her passions from the childhood which she shares now with her daughter.
Mirza ZORNIC
Bosnia Herzegovina Mirza is macroeconomic analyst in Raiffeisen Bank BH dd Sarajevo. He has joined to the Research Team in spring 2022 after 16 years work activities as a Credit analyst in Raiffeisen Risk Department where he was in charge for Corporate, FI and LRG clients. With desire to make step forward and improve his analytical skills in macroeconomics, he decided to join the Raiffeisen Research Team. Mirza holds master’s degree of Economic Sciences at Sarajevo University and he has experience in management of public institutions/companies as a member of the Supervisory Board / Assembly / Audit Committee in public institutions/companies. In private, most of time he spends with his family but he is trying to find some moments for tennis, football and running as a passionate sport fan.
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