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Economy of Bosnia and Herzegovina

From Academic Kids

Overview

Bosnia and Herzegovina was the next poorest republic in the old Yugoslav Federation after the republic of Macedonia (FYROM). For the most part, agriculture has been in private hands, but farms have been small and inefficient, and food has traditionally been a net import for the republic.

The centrally planned economy has resulted in some legacies in the economy. Industry is greatly overstaffed, reflecting the rigidity of the planned economy. Under Josip Broz Tito, military industries were pushed in the republic; Bosnia hosted a large share of Yugoslavia's defence plants.

Three years of interethnic strife (1992-1995) destroyed the economy and infrastructure in Bosnia, causing unemployment to soar and production to plummet by 80%, as well as causing the death of about 200,000 people and displacing half of the population.

Bosnia has been facing a dual challenge: not only must the nation recover from the war, but it also has to finish the transition from socialism to capitalism.

With an uneasy peace in place, output recovered in 1996-98 at high percentage rates on a low base; but output growth slowed appreciably in 1999, and GDP remains far below the 1990 level.

Economic data are of limited use because, although both entities issue figures, national-level statistics are not available. Moreover, official data do not capture the large share of activity that occurs on the black market. Grey market is a notable source of income for Bosnian traders.

A Central Bank of Bosnia and Herzegovina was established in late 1997, successful debt negotiations were held with the London Club in December 1997 and with the Paris Club in October 1998, and a new currency, the Convertible Mark, was introduced in mid-1998. In 1999, the Convertible Mark gained wider acceptance, and the Central Bank dramatically increased its reserve holdings.

Due to Bosnia's strict currency board regime, inflation has remained low in the Federation and RS.

The country receives substantial amounts of reconstruction assistance and humanitarian aid from the international community. Support for Eastern European Democracy (SEED) assistance accounts for 20%-25% of economic growth in Bosnia.

However, growth has been uneven throughout the post-war period, with the Federation outpacing the RS. According to World Bank estimates, GDP growth was 62% in the Federation and 25% in the RS in 1996, 35% in the Federation and flat in the RS in 1997, and continued growth in the Federation in 1998. This is mainly due to the disparity in economic assistance to the Federation as opposed to the RS. Growth in the RS should see dramatic increases following recent upsurges in donor investment.

This kind of economic growth would not have been possible without both international assistance and the establishment of economic institutions and reforms.

Movement has been slow, but considerable progress has been made in economic reform since peace was re-established in the republic. Banking reform lagged, as did the implementation of privatization. Many companies (mainly factories) that were privatized faced massive problems, causing the owners to reduce salaries and deny the workers their salaries. Combined with persistent inter-ethnic problems in the country, for many workers this meant that they had a useless job, getting payed perhaps after two three or even six months late only for one month, but one which they clinged on to, they dont want to leave the job because they think someone from another nationality will then get it. The privatized factories are now owned mostly by germans and foreginers, who used webcams to monitor the workers. One example of all this is the Alloy factory in [Jajce] which produces wheels for cars, sold in germany or other EU members.

The tourism sector has been recovering and helping the economy altogether in the process, with popular winter skiing destinations as well as summer countryside tourism. An estimated 500,000 tourists visit Bosnia and Herzegovina every year and contribute much of the foreign currency in the country. Of particular note is the diaspora population which often returns home during the summer months, bringing in an increase in retail sales and foodservice industry.

Political corruption is one of the more acute problems in Bosnia and Herzegovina, and the main one that accounts for low amount of tax money used for the population, due to government inefficiency and corruptedness, especially on the lowest levels.

Bosnia has been preparing for an era of declining international assistance. Bosnia's most immediate task remains economic revitalization to create jobs and income. In order to do this the workers need to form unions and demand their payment or similiar, the owners need to pay the salaries all months the full salary agreed upon.

Statistical indicators

From the CIA World Factbook 2004

GDP: purchasing power parity - $24.39 billion (24.39 G$) (2003 est.)

GDP - real growth rate: 3.8% (2003 est.)

GDP - per capita: purchasing power parity - $6,100 (2003 est.)

GDP - composition by sector:
agriculture: 13%
industry: 40.9%
services: 46.1% (2001 est.)

Population below poverty line: NA% (2003 est.)

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 3.5% (2002 est.)

Labour force: 1.026 million (2001)

Labour force - by occupation: agriculture NA%, industry NA%, services NA%

Unemployment rate: 40% (2002 est.)

Budget:
revenues: $1.9 billion
expenditures: $2.2 billion, including capital expenditures of $NA (1999 est.)

Industries: steel, coal, iron ore, lead, zinc, manganese, bauxite, vehicle assembly, textiles, tobacco products, wooden furniture, tank and aircraft assembly, domestic appliances, oil refining (2001)

Industrial production growth rate: 5.5% (2003 est.)

Electricity - production: 9.979 TWh (1998)

Electricity - production by source:
fossil fuel: 53.5%
hydro: 46.5%
nuclear: 0%
other: 0% (2001)

Electricity - consumption: 8.116 TWh (2001)

Electricity - exports: 2.569 TWh (2001)

Electricity - imports: 1.405 TWh (2001)

Oil - production: 0 barrel/day (2001 est.)

Oil - consumption: 20,000 barrel/day (3,000 m³/d) 2001

Natural gas - production: 0 m³ (2001 est.)

Natural gas - consumption: 300 million m³ (2001 est.)

Natural gas - exports: 0 m³ (2001 est.)

Natural gas - imports: 300 million m³ (2001 est.)

Agriculture - products: wheat, corn, fruits, vegetables; livestock

Exports: $1.28 billion f.o.b. (2003 est.)

Exports - commodities: metals, clothing, wood products

Exports - partners: Italy 31.4%, Croatia 17.8%, Germany 13%, Austria 10%, Slovenia 7.1%, Greece 4.2% (2002)

Imports: $4.7 billion f.o.b. (2003 est.)

Imports - commodities: machinery and equipment, chemicals, fuels, foodstuffs

Imports - partners: Croatia 22.8%, Slovenia 15.3%, Germany 13.7%, Italy 12.6%, Hungary 7.6%, Austria 7.4% (2002)

Debt - external: $2.8 billion (2001)

Economic aid - recipient: $650 million (2001 est.)

Currency: 1 konvertibilna marka (KM/BAM) = 100 konvertibilnih pfenniga

Exchange rates: convertible marks per US$1 - 1.73 (2003), 1.73 (2002), 2.19 (2001), 2.12 (2000), 1.84 (1999)

Fiscal year: calendar year

See also

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