Page 6 - DMA Bosnia & Herzegovina Report 2013

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4
Investing In Bosnia & Herzegovina
2013
B
osnia and Herzegovina
is a small yet open economy
with a GDP approaching
EUR13bn, equivalent to
approximately EUR4,000 per capita.
The previously war torn country has
largely prospered over the course of
the last 18 years. Following the Dayton
Peace Agreement, signed in 1995,
Bosnia and Herzegovina’s economy has
performed impressively. According to
the
Economist
, Bosnia and Herzegovina
was the 17th fastest growing economy
in the world from 1997 to 2007. Real
GDP growth averaged 11.2%, while in
the five years between 1996 and 2000
recording 25% growth per annum. Much
of the economic damage caused by the
conflict was reversed as the country
re-established itself as an upper middle-
income state.
The Global
Financial Crisis
and Structural
Challenges
However, like many countries in the
region, the effects of the global economic
crisis were acutely felt in Bosnia and
Herzegovina.
Prevailing
economic
conditions in a number of key partner
states hit the country hard – especially
through its close economic links to
Western Europe through exports,
remittances and capital inflows. Growth
dropped from 5.6% in 2008 to -2.9%
in 2009. Credit to both households and
businesses dried up and foreign direct
investment (FDI) suffered, falling from a
peak of EUR1.3bn in 2007 to EUR180mn
in 2009 – although, significantly, FDI
has started to recover again and is
estimated to have totalled EUR350mn
in 2012. Subsequent economic growth
has remained subdued with the effects
of the crisis on Bosnia and Herzegovina
still lingering. The International Monetary
Fund’s (IMF) latest assessments put
growth at 0.7% in 2010, 1.3% in 2011 and
0% in 2012. Now though, the prospects
are considerably brighter, with the IMF
estimating growth to average between 2%
and 4% per annum from 2014 to 2017.
The country’s recent economic woes
cannot be put down to the global
context alone. Bosnia and Herzegovina
suffers from structural challenges that are
a legacy of it socialist past and the 1995
peace agreement.. The establishment of
the Constitutional and Dayton Peace
agreement created two separate political
entities: The Federation of Bosnia and
E
conomic
O
verview
Economic Overview
by Jonathan Levack