Bosnia and Herzegovina flag Bosnia and Herzegovina: Economic and Political Overview

The economic context of Bosnia and Herzegovina

Economic Indicators

Nowadays, Bosnia and Herzegovina is considered an upper-middle-income country, achieving great results since 1995, the year in which the inter-ethnic conflict that destroyed much of the Bosnian economy and infrastructure, increased unemployment and decreased production, came to an end. Following a robust post-COVID-19 recovery, economic activity decelerated in the first half of 2023 due to weakening external demand and subdued private consumption amid persistently high, albeit decelerating inflation. The IMF estimated GDP growth for the entire year of 2023 at 2%. In 2024 and 2025, anticipated stronger private consumption, bolstered by lower inflation, along with strengthening external demand, are expected to facilitate a moderate acceleration in growth, reaching around 3%.

In the last few years, the general government accounts stayed nearly balanced, driven by stronger-than-expected revenue growth. However, planned investment spending faced challenges in implementation, primarily due to administrative obstacles and/or political deadlocks. This pattern is expected to persist in 2024 and 2025, although the upcoming general elections in 2024 are anticipated to introduce spending pressures, potentially resulting in a higher deficit. The IMF forecasted the budget deficit at 1.3% of GDP last year, 1.5% in 2024, and 1.1% in 2025. The debt-to-GDP ratio is relatively low (at 28.6% in 2023) and is expected to remain stable over the forecast horizon (IMF). Despite decelerating compared to the previous year, inflation remained high at 5.5% in 2023, primarily driven by rising prices for food, non-alcoholic beverages, housing, electricity, and household equipment. Throughout the forecast period, headline inflation is expected to continue declining, mainly due to the slowdown in price increases for imported commodities, particularly energy.

During the first eight months of 2023, employment was 1.3% higher than a year before, although unemployment remained high (15.3%, IMF). The primary sectors generating employment were trade and tourism. An outflow of skilled labor was also noticed, leading to labor shortages in sectors like construction. This trend might exacerbate wage pressures beyond productivity growth, potentially affecting the country's competitiveness. Short-term projections indicate continued growth in employment and further declines in unemployment, although a substantial portion of structural unemployment may constrain the extent of this decrease. The country’s GDP per capita (PPP) is low, estimated at USD 20,377 in 2022 by the World Bank.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 24.5226.9528.7430.5732.43
GDP (Constant Prices, Annual % Change) 4.12.03.03.03.0
GDP per Capita (USD) 7,0607,7788,3178,8749,438
General Government Balance (in % of GDP) 0.4-1.3-1.5-1.1-0.8
General Government Gross Debt (in % of GDP) 29.728.628.228.128.5
Inflation Rate (%) n/a5.53.02.72.5
Unemployment Rate (% of the Labour Force) 15.415.315.315.215.2
Current Account (billions USD) -1.10-1.16-1.09-1.12-1.22
Current Account (in % of GDP) -4.5-4.3-3.8-3.7-3.7

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

The agricultural sector accounts for 4.8% of the country’s GDP and nearly 17% of total employment (World Bank, latest data available), with corn, wheat, barley, fruits, vegetables, livestock, and poultry being the main agricultural products. Bosnia and Herzegovina has approximately 2.2 million hectares of agricultural land (43.2% of its total land area - FAO), and most of the farms are small in size and family-owned. The country is still a net food importer. According to the latest figures from the national statistical office, Bosnia's Federation maize crop stood at 429,229 tonnes in 2023, while soybean production reached 15,816 tonnes.

The industrial sector employs 33.2% of the workforce. Bosnia and Herzegovina mainly produces raw materials such as steel, coal, iron ore, lead, zinc, and aluminum. Additionally, wood is a significant sector and export commodity. Other important production sectors are mineral and chemical products, machinery, mechanical appliances, textiles, and footwear. The overall value-added of the manufacturing sector is estimated at 14% of GDP (World Bank). Bosnia's industrial production declined by 3.8% on the year in 2023, according to figures from the national statistical office.

Lastly, the service sector contributes 54.4% of GDP and half of total employment. The most important service sector of the economy is trade, followed by business services, transport, and construction. Tourism had been growing fast in recent years, and although it was impacted by the pandemic, it showed resilience: in 2023, the total number of tourists visiting the country reached 1.7 million, reflecting a 17.3% increase compared to the previous year. Additionally, total tourist overnights rose by 13.2% to 3.6 million during the same period. As per the latest figures by the European Banking Federation, 23 commercial banks operate in the country.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 11.3 34.3 54.4
Value Added (in % of GDP) 4.7 25.2 53.7
Value Added (Annual % Change) -2.3 0.5 5.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
62,9/100
World Rank:
82
Regional Rank:
40

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Sources of General Economic Information

Ministries
Ministry of Finance
Ministry of Energy, Mining and Industry
Ministry of Environment and Tourism
Ministry of Foreign Trade and Economic Relations
Ministry of Agriculture, Water Management and Forestry
Statistical Office
Federal Office of Statistics
Central Bank
Central Bank of Bosnia and Herzegovina
Stock Exchange
The Sarajevo Stock Exchange
Banja Luka Stock Exchange
Economic Portals
Capital market portal
 

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Latest Update: April 2024