In 2015, Bosnia and Herzegovina’s gross domestic product (GDP) is expected to grow by between 2.0% and 2.5%, according to forecasts of the World Bank, the European Bank for Reconstruction and Development (EBRD), and the International Monetary Fund (IMF). The factors, which will support the economic growth, include exports and industrial production, which will benefit from cheaper oil prices, as well as investments in infrastructure in areas damaged by the record floods of May 2014.
Bosnia managed to achieve economic growth in 2014 despite the torrential rainfall that triggered wide-spread floods in May and caused damages estimated at 2.0 billion euro or 15% of the country's GDP. Retail sales and exports helped back economic activity, along with an increase in industrial output. The unemployment rate, including youth unemployment, continued to be one of the highest in Europe due to lack of economic and regulatory reforms.
According to the European Commission's Progress Report on Bosnia and Herzegovina, the country's government made very limited progress on political and economic issues and on moving towards European standards in 2014. Concerning the economic criteria, Bosnia and Herzegovina achieved insufficient progress towards becoming a functioning market economy.
Bosnia, similar to other countries in Southeast Europe, relies on remittances from emigrants. In 2014, remittances grew by 3.3% to 1.64 billion euro or 12.5% of the country's projected full-year GDP, according to data from the World Bank.
The country fell to the 107th place in the World Bank's Doing Business 2015 report from the 104th position in the 2014 edition. It did, however, improve its position in the report's Getting Credit and Registering Property but dropped in the ranking in all other categories.
The country's GDP increased by a real 0.8% to 25.623 billion Bosnian marka in 2014, according to provisional data of Bosnia and Herzegovina's Agency of Statistics (BHAS).
The gross value added (GVA) generated by the national economy increased by 0.7% in value in 2014 and totalled 20.93 billion Bosnian marka. The industrial sector shrank by 3.3% and its share in the GVA structure declined to 21.4% from 22.3%. The services sector recorded a 3.1% annual increase, equal to
a 69.6% share in the GVA, compared to 67.9% in the previous year. The agricultural sector registered a drop of 9.6%, thus decreasing its share in the GVA to 7.6% from 8.5%. The construction sector grew by 6.5% and its share inched up by 0.3 percentage points to 5.2%.
Industrial output was up by 0.1% on the year in 2014. The manufacturing sector grew by 3.8%, while the electricity and gas supply, and mining sectors declined by 9.6% and 2.1%, respectively.
The segments which registered the highest annual declines in 2014 were manufacture of computer, electronic and optical products with a 49.7% drop, followed by manufacture of tobacco products with a fall of 14.1%, and manufacture of other transport equipment which reported a decrease of 11.8%, according to BHAS data.
Retail sales grew by 11.6% y/y in the fourth quarter of 2014, while wholesale trade decreased by 1.0%, according to BHAS data. Wholesale trade with other machinery, equipment and supplies marked the highest increase, of 17.3%, while sale, maintenance and repair of motorcycles and related parts and accessories declined the most by 21.1%.
Bosnia and Herzegovina registered an average annual deflation of 0.9% in 2014, compared to a 0.1% deflation a year ago. In 2014 the highest annual decrease in consumer prices was registered in telephone and telefax equipment, of 5.5%, followed by clothing, and footwear, which got cheaper by 5.3% and 4.7% respectively. The consumer groups that recorded inflation were led by travel services, which got more expensive by 12.6%, followed by tobacco with 9.2%, and postal services with 3.5%.
Unemployment in Bosnia and Herzegovina fell to 43.6% of the total labour force in the last month of 2014 from 44.6% a year earlier, according to data of BHAS. The employed population aged 15 years and older was 708,000 in December 2014, up by 2.7% y/y. Broad money in Bosnia and Herzegovina (money aggregate M2) increased by 7.8% y/y and reached 17.4 billion marka in December 2014, according to data of the Central Bank of Bosnia and Herzegovina (CBBH).
Quasi-money, which includes other deposits in domestic and foreign currency, as well as transferrable deposits in foreign currency, increased by 6.0% to 9.96 billion marka. Money aggregate M1, or narrow money, jumped by 9.4% to 7.32 billion marka.
Loans to the non-government sector totalled 15.7 billion marka in December 2014, up by 1.8% y/y, according to CBBH.
Loans to non-financial corporations fell by 1.5% to 8.2 billion marka in December, while household loans rose by 5.7% to 7.466 billion marka. House purchasing loans were down by 2.5% to 605 million marka.
The total external government debt amounted to 8.2 billion marka in the fourth quarter of 2014, up by 10.4% on the year. In comparison to the third quarter of 2014, the government external debt grew by 62 million marka, according to CBBH.
Bosnia and Herzegovina's main foreign creditor as of the fourth quarter of 2014 were the World Bank's International Development Association, which accounted for 22.1% of the total government external debt.
The current account gap widened to 2.08 billion marka in 2014 from 1.5 billion marka in 2013, according to central bank statistics data.
Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2015