Donor Co-Financing Assessment for New Country Strategy
2. Economic Context
2.1. Macroeconomic Context and Outlook for Strategy Period
Bosnia and Herzegovina - Main macroeconomic indicators
-4.1
2016 2017 2018 2019 2020
GDP growth (% y-o-y)
3.1
3.2
3.7
2.8
-3.2
CPI inflation (% avg.)
-1.1
1.2
1.4
0.6
-1.1
Government balance
0.3
1.8
1.7
1.4
(% of GDP)
Current account balance
-4.8
-4.8
-3.3
-2.8
-3.8
(% of GDP)
Net FDI (% of GDP)
-1.8
-2.3
-2.9
-1.5
-1.7
[neg. sign inflow]
=
External debt
63.8
72.0
64.4
(% of GDP)
Gross reserves
(% of GDP)
General government
44.1
39.2 34.3 32.5
36.7
gross debt (% of GDP)
Unemployment (% pop)
25.4
20.5
18.4 15.7
15.9
Nominal GDP ($bn)
64.3 69.5
31.9
33.6
34.8
35.7 40.5
16.9
18.1
20.2
20.2
19.8
Source: National authorities, IMF and EBRD calculations
•
European Bank
for Reconstruction and Development
Relatively slow growth over the past decade was led by domestic
demand. Over the period of 2010-2019, real GDP grew at around 2 per
cent annually driven by consumption and investment. Net exports
affected the growth only marginally positively as the positive
contribution of exports was largely neutralised by imports growth.
After a recession in 2020, economic activity is recovering. The economy
contracted by 3.2 per cent in 2020 on the back of falling exports,
consumption and investment. The tourism sector was severely affected,
while the manufacturing output fell by 4.4 per cent. The economy
returned to growth in 2021, on the back of strong recovery in external
markets and expansion of domestic private consumption. In the first
three quarters of 2021, industrial output and goods exports increased
strongly and tourism sector was also doing significantly better. Still, the
number of overnight stays remains significantly below the level in 2019.
Inflation pressures increased in 2021 on the back of elevated energy
and food prices.
Public debt is at a moderate level. As a consequence of increased
financing needs of the governments to respond to the crisis, public debt
rose to around 37 per cent of GDP at the end of 2020. The talks
between the country's authorities and the IMF on a three-year Extended
Fund Facility worth €750 million failed in December 2020. Discussions
about a new program have not restarted.
A recovery is underway. GDP is forecast to grow by 4.5 per cent in 2021,
followed by a 3.0 per cent in 2022 (EBRD REP, November 2021). Main
risks to the outlook are connected to the rising commodity prices,
potential slowdown in the main economic partners and increasingly
volatile external environment. Lack of impetus to undertake structural
reforms and increase investor confidence dampens the longer term
growth prospects.
PUBLIC
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