Bosnia & Herzegovina
Economic Overview
In the year 2004 Bosnian economy registered a steady growth, achieving higher growth rate than that in 2003.
Estimated GDP in 2004 amounted to approximately KM 13 bln. (1KM=0.51 EUR), which was by 5.5% higher in comparison with nominal GDP in 2003. At the same time, estimated real GDP growth rate was around 5.0%. The estimated non-registered economy in Bosnia and Herzegovina in 2004 reached 38% of the estimated nominal GDP. Thus, the estimated total nominal GDP ran up to KM 17.886 bln.
GDP growth was the result of vigorous industrial and agricultural production in both entities, as well as reviving in the trade, construction, transport, and financial mediation sectors. Performance in the industrial production sector was particularly impressive, with the greatest increase recorded in mining, processing industry and electricity, and gas and water supplies in the amounts of 11.7%, 12.4%, and 1.4% respectively. In Federation of Bosnia and Herzegovina (FBH), certain sectors accomplished extraordinary growth rates, among those coke production (1, 078.6%), textile production (721.7%), and production of chemicals (61.1%). In Republika Srbska (RS) the volume of industrial production increased by 13.9%.
Average wages in 2004, compared to 2003, in FBH, RS and the District of Brcko were by 1.9%, 11.4% and 1.8% respectively higher. At the same time, price stability represented a key element of Bosnian macroeconomic frame, while inflation recorded a negligible 0.5% increase.
Current account deficit in 2004 dropped by 0.6% as compared to 2003, but it still remained sufficient, illustrating a continuing foreign trade imbalance although exports in 2004 grew faster than imports. In comparison with 2003, exports increased by 21.3%, while imports registered an 11.9% growth. Major export partners in 2004 were Croatia (8.8%), Italy (6.5%), Serbia and Montenegro (2.7%), and Austria (2.3%). Major import partners were Croatia (17.6%), Germany (11.8%), and Serbia and Montenegro (10.2%). Exports to EU member states represented 38.4% of Bosnia and Herzegovina's total export as compared to 37.8% in 2003, while EU imports amounted to 33.0% as compared to 34.0% in 2003.
Total foreign direct investment in 2004 amounted to KM 943 mln., with major beneficiaries being the banking sector (35.1%), production (31%), and trade (11.3%).
External debt servicing was regular and timely in 2004, with Bosnia and Herzegovina meeting all its international obligations in that respect. Major creditor were the World Bank (51%), countries from the Paris Club (24%), and London Creditors' Club with 6%.
In 2005 domestic demand was strong and represented the main reason for economic activities and tax revenue growth. Despite having an overall positive effect on Bosnian economy, domestic demand also deepened foreign trade imbalance.
The year 2005, similarly to 2004, was characterised with high industrial production growth rates. As it was the case during 2004, the mining sector, the processing industry and electricity, and gas and water supply recorded substantial growth rates. Other branches with impressive performance were textile, chemicals, rubber and plastics, metal, machinery, and furniture production.
Throughout the year Bosnia and Herzegovina continued with the implementation of various fiscal sector reforms, with the greatest focus on the introduction of a unified VAT.
GDP in 2005 amounted to USD 8.889 bln., with the large informal sector accounting for an estimated 50% share of it. The overall GDP growth rate was 5.2%. At the same time, inflation rate in 2005 reached 1.4%. Bosnian exports totaled USD 2.7 bln., while imports amounted to USD 6.8 bln. The external debt was USD 3.1 bln.