The Central Bank of Bosnia and Herzegovina has published its official estimate of Bosnia and Herzegovina's potential GDP and output gap, using an extended production function and incorporating assumptions from its spring round of medium term macroeconomic projections. It estimates that potential GDP growth will remain moderate over 2026 to 2028, at 3.38 percent in 2026, 3.32 percent in 2027 and 3.07 percent in 2028, with a small negative output gap of 0.26 percent in 2026 that is expected to close by the end of the projection horizon. The assessment covers the historical period from 2008 and says real economic growth was above potential in 2022 to 2025. The bank notes that strong nominal wage growth in 2025 partly drove this result and led it to revise its 2025 output gap estimate compared with its May 2025 assessment. Over the longer term, it says estimated potential growth remains insufficient for stronger real convergence with the European Union average, and identifies higher productivity and a stronger labour supply, including labour market reforms that increase participation of inactive working age people, as the main conditions for faster potential growth. To improve future model estimates, the bank is working on productivity estimates at the firm and industry level and plans to replace part of its current model assumptions with model based estimates from next year.
Central Bank of Bosnia and Herzegovina2026-05-26
Central Bank of Bosnia and Herzegovina publishes potential GDP and output gap estimates through 2028 with potential growth slightly above 3 percent
The Central Bank of Bosnia and Herzegovina has updated its potential GDP and output gap estimates, projecting moderate potential growth of 3.38 percent in 2026, 3.32 percent in 2027 and 3.07 percent in 2028, with a small negative output gap of 0.26 percent in 2026 expected to close by the end of the period. It notes that real growth exceeded potential from 2022 to 2025, partly due to strong nominal wage growth in 2025, but stresses that potential growth remains too low for faster convergence with the European Union, underscoring the need for productivity gains and higher labour participation. The bank will refine its model by developing firm- and industry-level productivity estimates and replacing some assumptions with model-based estimates from next year.