Bosnia and Herzegovina: country overview23 August 2012
by Ina Dimireva -- last modified 12 February 2013
Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007. Bosnia and Herzegovina's top economic priorities are: acceleration of integration into the EU; strengthening the fiscal system; public administration reform; World Trade Organization (WTO) membership; and securing economic growth by fostering a dynamic, competitive private sector.
Member of Schengen area: No
Political system: Republic
Capital city: Sarajevo
Total area: 51 209 km²
Population: 4.6 million
Currency: Bosnian convertible mark
Bosnia has a transitional economy with limited market reforms. The economy relies heavily on the export of metals as well as on remittances and foreign aid. A highly decentralized government hampers economic policy coordination and reform, while excessive bureaucracy and a segmented market discourage foreign investment. The interethnic warfare in Bosnia and Herzegovina caused production to plummet by 80% from 1992 to 1995 and unemployment to soar. With an uneasy peace in place, output recovered in 1996-99 but slowed in 2000-02 and picked up again during 2003-08, when GDP growth exceeded 5% per year. However, the country experienced a decline in GDP of nearly 3% in 2009 reflecting local effects of the global economic crisis. GDP has stagnated since then. Foreign banks, primarily from Austria and Italy, now control most of the banking sector. The konvertibilna marka (convertible mark or BAM) - the national currency introduced in 1998 - is pegged to the euro, and confidence in the currency and the banking sector has increased. Bosnia's private sector is growing, but foreign investment has dropped off sharply since 2007. Government spending, at roughly 50% of GDP, remains high because of redundant government offices at the state, entity and municipal level. Privatization of state enterprises has been slow, particularly in the Federation, where political division between ethnically-based political parties makes agreement on economic policy more difficult. High unemployment remains the most serious macroeconomic problem. Successful implementation of a value-added tax in 2006 provided a predictable source of revenue for the government and helped rein in gray-market activity. National-level statistics have also improved over time but a large share of economic activity remains unofficial and unrecorded. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007. Bosnia and Herzegovina's top economic priorities are: acceleration of integration into the EU; strengthening the fiscal system; public administration reform; World Trade Organization (WTO) membership; and securing economic growth by fostering a dynamic, competitive private sector. In 2009, Bosnia and Herzegovina was granted an International Monetary Fund (IMF) stand-by arrangement, necessitated by sharply increased social spending and a fiscal crisis exacerbated by the global economic downturn. Disbursement of IMF aid was suspended in 2011 after a parliamentary deadlock left Bosnia without a state-level government for over a year. The IMF concluded a new stand-by arrangement with Bosnia in October 2012, with the first tranches paid in November and December 2012.
Bosnia and Herzegovina - along with other Western Balkans countries – was identified as a potential candidate for EU membership during the Thessaloniki European Council summit in June 2003.
Since then, a number of agreements between the EU and Bosnia and Herzegovina have entered into force - visa facilitation and readmission agreements (2008), Interim Agreement on Trade and Trade-related issues (2008).
Common Foreign and Security Policy and the European Security and Defence Policy
The EU continues to deploy considerable resources in Bosnia and Herzegovina within the framework of the Common Foreign and Security Policy (CFSP) and the European Security and Defence Policy (ESDP). The current EU Special Representative (EUSR), Peter Sorensen, is also Head of the Delegation of the European Union.
The EUFOR/Althea mission continues to be present in Bosnia and Herzegovina. Following an improved security situation, EU EUFOR/Althea forces were reduced from 6000 to around 2000. The mandate of the EU Police Mission (EUPM) has been extended until the end of June 2012. The EUPM continues to focus on police reform, as well as the fight against organised crime and corruption.
Source: Europa, The World Factbook