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Current Economic Situation in Bosnia and Herzegovina

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Abstract:

This article provides an overview of the current economic situation in Bosnia and Herzegovina. Beginning in the second half of 2008, macroeconomic conditions in B&H began precipitating a decline in economic activity. While the global financial crisis was among the factors contributing to this decline, it was far from the only factor. Problematic macroeconomic conditions were also a result of B&H’s own structural and political problems, caused largely by the shortcomings of a political entity comprising two autonomous entities. Due to such problems, the governments of B&H turned to the International Monetary Fund for assistance. This article analyzes the effects of the first two “stand by” arrangements made between the IMF and B&H and discusses implications for further, ongoing stand by arrangements made between the IMF and B&H. This paper also examines the lack of unified economic space between The Federation of Bosnia and Herzegovina and The Republic of Srpska, which has resulted not only in ineffective monetary policy but also in different fiscal and taxation systems between the two entities. While various existing analyses claim that B&H has little hope of resolving its economic woes due to its current political and economic structure, this article offers solutions and measures that, if successfully implemented, would lead to more efficient recovery and self-sustainable economic growth.

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