Rising global energy prices could place additional pressure on households and businesses in Republika Srpska through higher fuel, transportation and food costs. Economists warn that the expected increases could weaken purchasing power, raise production expenses and slow economic activity.
According to the latest World Bank forecast cited in the report, global energy prices could rise by 32% this year, compared with an earlier projection of 24%.
The report identifies conflicts in the Middle East and disruptions to global energy supplies as the main factors behind the revised outlook.
Brent crude oil prices are expected to average $92 per barrel, while natural gas prices in Europe could increase by nearly 60%.
Rising energy prices threaten food production and household budgets
The projected increase in energy prices is raising concerns about further increases in the cost of mineral fertilizers and food.
Farmers and consumers are already struggling with high production costs, and additional energy price increases could further complicate the situation.
More expensive fertilizers, transportation and agricultural inputs could raise the cost of domestic food production, ultimately putting additional pressure on retail prices.
Economist Igor Gavran told Glas Srpske that the World Bank’s projections reflect current global circumstances but could change if geopolitical tensions ease.
“This forecast applies under the assumption that the current situation remains unchanged. If a ceasefire is reached and supply chains return to normal, markets could stabilize and global prices could decline,” Gavran explained.
He noted that easing conflicts in the Middle East and Ukraine could contribute to a relatively rapid improvement in global energy markets.
Fuel imports make Republika Srpska vulnerable to global price fluctuations
Gavran believes that the impact on Republika Srpska could be somewhat less severe when it comes to fertilizers, given the availability of Russian gas supplies.
However, he emphasized that the domestic fuel market remains highly dependent on imports.
“When it comes to fuel, we depend on imports, and global market developments are directly reflected in domestic prices,” Gavran said.
“Nevertheless, prices are already very high, so it is difficult to expect a significant deterioration without further major disruptions,” he added.
According to Gavran, the greatest long-term challenge lies in domestic food production.
Local farmers are facing not only higher fertilizer and input costs but also unequal competition from imported agricultural products.
Higher production and transportation costs could reduce business profits
Economist Miloš Grujić warned that increases in global oil prices could begin affecting fuel prices at domestic filling stations within the coming weeks.
He explained that higher energy costs would gradually spread throughout the economy, increasing production and transportation expenses.
“Fluctuations on international commodity exchanges will be directly reflected in the fuel market,” Grujić said.
“At the same time, the electricity market in Republika Srpska is protected until the end of the year thanks to domestic production. However, pressure on electricity generation costs remains, meaning that potential price increases could become an issue at the beginning of the next regulatory year,” he explained.
Grujić emphasized that higher transportation and raw material costs would reduce companies’ profit margins.
Meanwhile, rising prices of food and essential goods would further weaken household purchasing power.
Agriculture is particularly vulnerable because expensive mineral fertilizers increase production costs and could affect both crop yields and domestic food prices.
Economists warn of stagflation and liquidity problems
Grujić cautioned that the combination of higher production costs and weaker consumer demand could create stagflationary pressures, characterized by rising prices alongside sluggish economic growth.
“The combination of more expensive inputs, transportation and weaker consumption creates stagflationary pressures,” he said.
“Businesses, particularly small and medium-sized enterprises, could face liquidity problems, reduced competitiveness and postponed investments, while more expensive financing would make it even harder to meet financial obligations,” Grujić warned.
Such developments could place additional strain on the domestic economy, particularly on businesses already operating with limited financial resources.
Lower global prices may not translate into cheaper products
Gavran also warned that a potential decline in international energy prices would not necessarily lead to lower prices for consumers in Republika Srpska.
He emphasized that domestic retailers do not always pass reductions in their operating costs on to customers.
“For this reason, it is important that the competent institutions monitor the behavior of retailers and intervene when reductions in costs are not passed on to consumers,” Gavran concluded.
Source: Glas Srpske
