Bosnia-Herzegovina

Bosnia’s economy to increase by 3.5% this year

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Bosnia and Herzegovina’s GDP rebounded 1.5% year-on-year in the first quarter of 2021, after three consecutive quarters of contraction amid the Covid-19 crisis, according to the country‘s Agency for Statistics (BHAS).

The largest rises were recorded in the manufacturing sector (8.4%), financial & insurance activities (5.1%) and administrative & support services (4.8%). On a seasonally adjusted quarterly basis, the economy grew by 4.6%, after a 3.0% advance in Q4 2020.

The European Bank for Reconstruction and Development (EBRD) in its latest Regional Economic Prospects report released in June 2021 said it expects Bosnia and Herzegovina’s economy to increase by 3.5% this year, before growth slows down to 3% in 2022.

In the September 2020 edition of the report, the London-based lender said that Bosnia-Herzegovina’s economy will expand by 3% this year.

Downside risks for Bosnia’s economic growth this year include slower recovery in the main Eurozone export markets, a possible prolonged impact of coronavirus on tourism as well as lack of impetus to undertake structural reforms and increase investor confidence, the EBRD said.

Economic activity contracted by 4.3% last year due mainly to Covid-19, though economic growth had already been decelerating before the outbreak. The tourism sector was severely affected; foreign tourists arrivals decreased by 70% in 2020.

Trade, transport, and accommodation and food services recorded a combined decline of 15%. The crisis also hit the manufacturing sector, with output falling by 7.6%.  Because of the pandemic, remittances from the country’s large diaspora also shrank by 15%, negatively affecting consumption.  Fiscal
measures related to the Covid-19 response in 2020 were around 2.5% of the GDP, EBRD said.

Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007. In 2016, Bosnia began a three-year IMF loan program, but it has struggled to meet the economic reform benchmarks required to receive all funding installments. Foreign banks, primarily from Austria and Italy, control most of the banking sector in the Balkan  country.