Bosnia and Herzegovina Economy - overview

Factbook > Countries > Bosnia and Herzegovina > Economy

Economy - overview: Bosnia has a transitional economy with limited market reforms. The economy relies heavily on the export of metals, energy, textiles, and furniture 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. 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 remained stable.

Interethnic warfare in Bosnia and Herzegovina caused production to plummet by 80% from 1992 to 1995 and unemployment to soar, but the economy made progress until 2008, when the global economic crisis caused a downturn. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007.

Bosnia's private sector is growing slowly, but foreign investment has dropped sharply since 2007. Government spending - including transfer payments - remains high, at roughly 40% of GDP, because of redundant government offices at the national, sub-national, and municipal level. High unemployment remains the most serious macroeconomic problem. Successful implementation of a value-added tax in 2006 provided a steady 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's top economic priorities are: acceleration of integration into the EU; strengthening the fiscal system; public administration reform; World Trade Organization membership; and securing economic growth by fostering a dynamic, competitive private sector.

Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.

Source: CIA World Factbook - This page was last updated on October 8, 2016

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