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

The economic context of Bosnia and Herzegovina

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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. After contracting during the COVID-19 pandemic, the economy resumed its growth path and expanded by 7.5% in 2021. Growth continued in the first (5.8%) and the second (5.9%) quarters of 2022 led by consumption and investments, but the external shocks caused by the Russian invasion of Ukraine caused a slowdown in both domestic and foreign demand, resulting in an overall growth rate of 2.5% for the year. As domestic and external risks persist, the IMF forecasts a growth rate of around 2% this year and 3% in 2024.

The general government balance was negative by 0.2% of GDP in 2022; however, the public accounts of the country's three constituent entities (Central State, Federation of Bosnia and Herzegovina and Republika Srpska) are expected to improve in 2023, when the government budget should return into positive territory (1.2% of GDP). Similarly, the debt-to-GDP ratio returned around its pre-pandemic level (31.8% in 2022) and should follow a downward trend over the forecast horizon 2(9.3% and 27.9% this year and the next, respectively – IMF). The government does not have access to markets, but it receives financing from several multilateral institutions, including the EBRD and the EU Commission. Inflation reached double-digit rates in 2022 (10.5%) mostly due to the marked rise in energy prices, but showed signs of deceleration towards the end of the year. According to IMF’s estimates, it should gradually ease in 2023 (4.5%) and 2024 (3.5%).

Corruption and the high level of unemployment are major hurdles to the country's economic development. The unemployment rate stood at 17.3% in 2022 and is expected to remain stable over the forecast horizon. Addressing bottlenecks causing persistent long-term unemployment, such as enhancing formal labour market participation (especially for women) and reducing skills mismatches for youth will be key. The country’s GDP per capita (PPP) is low, estimated at USD 17,899 in 2022 by the IMF.

 
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 5.2% of the country’s GDP and nearly 18% 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 173,232 tonnes in 2022, down by 18% y-o-y, while tobacco production increased by 8% to 298 tonnes.

The industry sector represents 25.5% of GDP, employing around 32% of the workforce. Bosnia and Herzegovina mainly produces raw materials such as steel, coal, iron ore, lead, zinc and aluminium. Additionally, wood is a significant sector and export commodity. Other important production sectors are mineral and chemical products, machinery, mechanical appliances, textile and footwear. The overall value-added of the manufacturing sector is estimated at 14% of GDP (World Bank). Bosnia's industrial production recorded a yearly increase of 1.7% in 2022 according to figures from the national statistical office.

Lastly, the service sector contributes 54.9% of GDP and more than 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; nevertheless, the impact of the COVID-19-induced crisis was severe. In 2022, the sector has been recovering: a total of over 1.7 million foreign tourists visited Bosnia and Herzegovina last year, up by 86% y-o-y, while the number of domestic tourists increased by 32% on the year to 2 million. 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

See the country risk analysis provided by Coface.
 

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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
Ministry of Development, Entrepreneurship and Craft
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: December 2023