Bosnia and Hercegovina (BiH) is facing arguably its most serious political crisis since 1995, owing to escalating tensions between Bosnian Serb leaders and the international High Representative in BiH, Miroslav Lajcak. BiH's Bosnian Serb prime minister, Nikola Spiric, resigned on November 1st in protest at Mr Lajcak's plans to simplify decision-making in state-level institutions. Other resignations could follow, raising the risk of further delays in passing the reforms needed for BiH to sign an EU stabilisation and association agreement (SAA). Prospects for amending BiH's constitution to strengthen state-level institutions are also slim at present. The currency board arrangement will stay in place. Inflation fell sharply in 2007 and will remain low in 2008-09. Strong investment and private consumption will drive the economy, and annual average real GDP growth is projected at 6% over the two years of the forecast period. The annual current-account deficit will remain large, at an average of about 15% of GDP.