Mild inflationary pressures could mark the first quarter of 2025.
Mild inflationary pressures could mark the first quarter of 2025, with an annual inflation rate of 1.8 percent, the Central Bank of Bosnia and Herzegovina estimates. According to Professor Ljiljan Veselinović from the Faculty of Economics, University of Sarajevo, rising prices of raw materials, energy and labor will continue to be key factors putting pressure on the market.
Prof. Dr. Ljiljan Veselinović, Faculty of Economics, University of Sarajevo
Inflationary pressures at the beginning of 2025 can be divided into two main groups, Veselinović points out for Akta.ba.
The first group includes the increase in the prices of raw materials, energy and labor, which have already caused a chain reaction of price increases in the previous period: ” Electricity price increases have been announced, the minimum net salary in the FBiH has been set at 1,000 KM, and certain raw materials on a global level (such as coffee) are recording price increases. These increases in production factors are most often passed on to consumers through the selling price. However, I do not expect there to be significant price increases like the ones we had the opportunity to experience in the not-so-distant period behind us ,” Veselinović explains to the Akta.ba portal.
Labor costs represent a key item in the business of many sectors, because they directly affect the competitiveness and profitability of companies, prof. Dr. Ljiljan Veselinović states:
“Labor costs are the most important category of costs in many industries, and as of October 2024, the average net salary in almost all industries (except for industry I – hotel and catering) has “passed” 1,000 KM. In this sense, labor costs will certainly increase due to the decision of the FBiH Government to change the minimum wage, but this increase should not be significant enough to cause drastic increases in the prices of products and services,” Veselinović points out.
The second group includes seasonal effects after holiday spending, which could temporarily reduce demand in certain product categories. “This is a very short-term effect, which mainly manifests itself in January and has no long-term impact on the market ,” Veselinović points out.
IMPACT OF PRICE INCREASES ON HOUSEHOLD BUDGETS
Although inflation should not exceed 2 percent, experts warn of possible risks associated with rising prices for basic goods. According to Veselinović, rising prices for basic goods such as food and energy could have a serious impact on household budgets, especially those with lower incomes. “Any increase in the price of basic goods has a disproportionately greater impact on households that already have limited incomes. Such citizens will be forced to prioritize basic expenses, which will leave less room for savings or the purchase of other products and services ,” Veselinović explains.
“First of all, I believe that the estimates made so far about inflation below 2% are quite realistic, but no one can predict with certainty what will happen in the future and how some global events, such as the US presidential election, will affect the global market. Changes in US foreign policy or trade relations can lead to fluctuations in commodity prices on world stock exchanges. However, I am personally optimistic about 2025 and I think that we should not expect a significant wave of price increases, except for individual goods and services as a result of adverse weather conditions such as droughts, extreme weather conditions and the like. However, the increase in prices, especially of basic goods such as food and energy, has the potential to damage citizens’ household budgets,” economist Veselinović points out for the Akta.ba portal.
ARE THE ANNOUNCED WAVES OF PRICE RISE SHORT-TERM OR IS THERE A RISK OF LONG-TERM CHANGES?
Professor Ljiljan Veselinović points out that, as a small economy, Bosnia and Herzegovina is not able to produce all the necessary resources, so events on the global market will always have an impact on product prices. In the long term, there is a significant risk of price growth, especially in a period longer than a year.
“When we take into account global factors, Bosnia and Herzegovina could additionally feel their impact through the continued rise in energy and raw material prices ,” warns Veselinović.
He also emphasizes the importance of ensuring greater energy independence through the use of renewable energy sources. “Greater reliance on renewable sources would not only reduce domestic costs, but would also protect us from potential export restrictions and high taxes on ‘dirty’ energy ,” says Veselinović.
Finally, he warns that unpreparedness for global environmental challenges can seriously threaten the country’s economic stability and competitiveness. “These factors represent a long-term challenge to the economic stability of Bosnia and Herzegovina ,” Veselinović concludes.
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Source: akta.ba
