Bosnia and Hercegovina

Politics:

• Analysis

  Bosnia and Hercegovina politics: New moves to end Federation crisis make li

  The president of the larger entity of Bosnia and Hercegovina (BiH)-the Bosniak (Bosnian Muslim)-Bosnian Croat Federation-has suggested that a snap election may be needed to solve the political crisis in the largely autonomous entity. Zivko Budimir's suggestion, in a TV interview on January 28th, that an early election might be the best way to end the political paralysis in the Federation, is intended to deal with one of three overlapping crises in the entity. These three acute problems involve a political deadlock relating to the composition of the government; poor governance, exacerbated by rampant bureaucracy; and a stalemate over the status of the southern city of Mostar, the unofficial capital of the Hercegovina region.

  The government crisis that Mr Budimir's proposal of a pre-term election is designed to address relates to the insistence of the largest Bosnian Croat party, the Croatian Democratic Union of BiH (HDZ BiH), that it be included in the ruling coalition, which was formed in March 2011. The HDZ BiH's goal seemed to have come a step closer at the end of last year when the Federation's largest political force, the Social Democratic Party of BiH (SDP BiH), agreed to a government reshuffle. However, two small Bosnian Croat parties, which are in the current government, are unwilling to vacate their ministerial seats in favour of the HDZ BiH-and their refusal has been backed by Mr Budimir, who belongs to one of these political formations, the Croatian Party of Rights of BiH (HSP BiH).

  Mr Budimir has been under intense pressure from the HDZ BiH and the SDP BiH to agree to a reshuffle. His suggestion that an early election should be held may have been prompted by his desire to relieve that pressure-while believing that none of the leading parties want to take up the challenge of going to the polls at a time of intense political uncertainty. Moreover, in the case of the SDP BiH, agreeing to a snap poll might put at risk the party's ministerial portfolios.

  Experts are asked to propose governance reforms

  Mr Budimir's initiative came a few days after the US ambassador to BiH, Patrick Moon, announced that he had set up an expert group to draft proposals for making the governance of the Federation more effective. The Federation has a complex structure, comprising ten cantons-each with its own government and extensive powers. The cantons are, for the most part, dominated by either Bosniak or Bosnian Croat political parties, which has resulted in tensions, especially between cantons led by the HDZ BiH on the one hand and the Federation government, from which the HDZ BiH is excluded, on the other hand. Below the cantons there is a further layer of authority, the municipalities, which are often at odds with the cantons or, in the case of the ethnically based districts in Mostar, in a state of perpetual conflict with each other.

  Any plan to streamline the governance of the Federation by abolishing or at least simplifying some layers of administration would be welcomed by the majority of local citizens. Such changes are also being encouraged by the EU-and now in a more tangible way by the US-because without a functioning Federation, it will be difficult to persuade the leaders of BiH's other entity, the Bosnian Serb republic, Republika Srpska (RS), to tone down their separatist rhetoric. In any case, unless BiH can operate as a functional state, it will not be able to make progress in its quest for closer integration with the EU, leading to eventual EU membership.

  Despite local politicians' words of welcome for the establishment of the expert group on the Federation's future, observers have expressed scepticism about the outcome of the new committee's deliberations, which are due to be made public in mid-2013. This scepticism is based on the widely shared opinion that politicians in the Federation benefit from the complexity of the local political structures, because the layers of unnecessary administration and excessive red tape increase their authority, network of clients and opportunities for bribe-taking.

  Mostar remains divided

  The third problem, relating to the governance of Mostar, encapsulates many of the problems affecting the Federation-ethnic divisions, political rivalries and conflicts over spheres of authority. On January 23rd the Office of the High Representative (OHR)-which oversees BiH's political development under the Dayton peace accords of 1995-convened a meeting of the main political parties in Mostar to discuss proposals for implementing two BiH Constitutional Court decisions, requiring changes to the city statutes. The court rulings are intended to bring Mostar in line with legislation, which stipulates that individual electoral districts should return representatives on the basis of the size of the electorate. This is not currently the case in Mostar, where each of the six districts elects the same number of councillors, favouring the Bosniak community, which is estimated to be smaller than the local Bosnian Croat population.

  The meeting was boycotted by the main party representing local Bosniaks, the Party of Democratic Action (SDA), which was concerned that implementation of the court rulings could diminish its influence in Mostar. However, the OHR's proposal to establish multi-ethnic electoral districts was also rejected by the HDZ BiH, which wants to accentuate the Bosnian Croats' prominent role in the city by reorganising the local administration into a single municipal unit.

  The latest initiatives to find a way out of the Federation's interlocking political crises hold out little hope that progress will be made in the short or even in the medium term. For that to happen, many entrenched sectional interests would need to be swept away. Local politicians, especially those in positions of power in one or another layer of government, see no benefit from making the required changes. BiH's international partners, who devised the Dayton peace plan and subsequently imposed many reforms on the country's reluctant elite, no longer appear to have the inclination or the energy to implement the latest proposals.

  January 30, 2013

• Background

  Bosnia and Hercegovina: Key figures

  Haris Silajdzic

  Mr Silajdzic founded the mostly Bosniak (Bosnian Muslim) Party for Bosnia and Hercegovina (SzBiH) in 1996. He was formerly an ally of Alija Izetbegovic, who founded the Party of Democratic Action (SDA) and was BiH's president during the 1992-95 war. Both Mr Silajdzic and Sulejman Tihic, who became the SDA leader following Mr Izetbegovic's death in 2003, are trying to become the de facto Bosniak leader in BiH. In October 2006 Mr Silajdzic was elected as the Bosniak member of BiH's tripartite central presidency, easily defeating Mr Tihic, and he was also instrumental in the SzBiH's success in the parliamentary election held at the same time.

  Milorad Dodik

  Mr Dodik has been BiH's leading Bosnian Serb politician in recent years. He is the founder and leader of the Alliance of Independent Social Democrats (SNSD) and has been prime minister of Republika Srpska (RS) since February 2006. Mr Dodik entered politics during the 1992-95 war in opposition to the extreme nationalists spearheading the Serb Democratic Party (SDS). He earned a reputation as a brave and uncompromising politician, often risking his personal security in arguing his position on issues such as war crimes and the SDS's connections with the local and Serbian mafia. Mr Dodik has adopted an increasingly nationalist tone, making the preservation of RS's semi-statehood the centrepiece of his platform, although he has also emphasised economic development.

  Nikola Spiric

  Mr Spiric became chairman of the Council of Ministers (the state-level cabinet) in early 2007, making him de facto prime minister of BiH. Mr Spiric, a member of the SNSD and an economist by training, is the first Bosnian Serb to serve as BiH's prime minister. He has pledged to increase the population's living standards and to focus on BiH's Euro-Atlantic integration. He resigned in November 2007 in protest at plans by the international High Representative in BiH, Miroslav Lajcak, to simplify decision-making in state-level institutions, but remained in office in a caretaker capacity. He was reappointed as prime minister in early 2008, after Mr Lajcak agreed to concessions favouring the Bosnian Serbs.

  Sulejman Tihic

  Mr Tihic leads the SDA and is a former Bosniak member of BiH's rotating state presidency. His wartime experience in a Bosnian Serb detention camp has had a major impact on his political views. Mr Tihic was the hand-picked successor of the late Mr Izetbegovic, who founded the SDA. However, the SDA's hardline nationalist faction has long opposed Mr Tihic's strategy of transforming the SDA into a modern centrist party, since this would reduce the influence of some of the party's more nationalistic founders, many of whom have links to clerical structures in BiH. He remains under pressure from the party rank and file, and also from Mr Silajdzic of the SzBiH.

  Dragan Covic

  Mr Covic remained leader of the Croatian Democratic Union of BiH (HDZ BiH) after the party's split in April 2006, which resulted in the formation of the more hardline HDZ 1990 splinter group. Mr Covic represents the more moderate faction of the HDZ BiH, which is in favour of co-operating with the international community, but at the same time is devoted to the Bosnian Croat autonomy agenda. Born in the southern city of Mostar, he holds a doctorate in economics. In May 2005 he was removed from the BiH presidency by the international community over corruption charges.

  The judiciary

  The Constitutional Court of BiH is the highest judicial authority and consists of nine judges. The BiH State Court was inaugurated in 2002 and deals with matters under the jurisdiction of the state, such as passports, identity cards, illegal immigration, human trafficking and inter-entity legal issues. Both entities have Supreme Courts. There are also cantonal and municipal courts in the Federation and municipal courts in RS. In March 2001 the OHR set up the Independent Judicial Commission (IJC) to conduct a comprehensive judicial reform. The essence of the reform was to rationalise the number of courts in both entities, to enable balanced ethnic representation among the judges, and to develop a standardised system of remuneration and training supportive of a professional and independent judiciary. As part of this reform, a state-level Higher Judicial and Prosecution Council (HJPC) was established to oversee the appointment of judges and prosecutors in both entities. The Constitutional Court does not fall under the jurisdiction of the HJPC. In 2005 the judicial reform programme marked a significant step with the establishment of a local war-crimes court, which has begun to try people accused of war crimes whose cases have either been brought locally or been transferred from the International Criminal Tribunal for former Yugoslavia (ICTY) in The Hague.

  The legislature

  Under the BiH constitution, supreme legislative authority is vested in the bicameral parliament of BiH, which comprises the House of Representatives and the House of Peoples. Two-thirds of the members of each house are elected by the Bosniak-Bosnian Croat Federation, and the remainder by RS. All legislation requires the approval of both chambers. Because of the ethnic composition of the parliament and the use of a "vital national interest" clause, this requirement has caused frequent delays in legislative procedure, often necessitating the High Representative's intervention. The Federation, RS and Brcko district all have their own parliaments, as do the ten cantons in the Federation.

  Media services

  The development of free media in BiH has received much international attention as part of the post-war rehabilitation process. BiH has six daily newspapers (of which four are produced in the Federation and two in RS), about 40 private television stations and three public ones. There are four public radio stations and well over 100 private ones, most of which are local. There are press agencies in the capital, Sarajevo, and in Banja Luka and Mostar. The quality of reporting is often poor and politically charged. Adoption of a new state-level public broadcasting law is one of the EU's preconditions for signing a stabilisation and association agreement (SAA) with BiH. Although progress towards the necessary legislation has faltered over Bosnian Croat demands for a Croatian-language public TV channel, the EU is nevertheless likely to sign the SAA in May 2008.

  Democracy index (for methodology, see Appendix)

  The Economist Intelligence Unit's 2006 democracy index ranks Bosnia and Hercegovina (BiH) 86th out of 167 countries, putting it among those states considered to be hybrid regimes. BiH's weakest score is in the "Government functioning" category, reflecting shortcomings in the complex and multi-layered system of governance set out by the Dayton peace agreement after the 1992-95 war. Political structures are perceived to be complicated, inefficient and tainted by corruption. A package of constitutional amendments aimed at strengthening the central state-level government was rejected by the state parliament in April 2006, and fresh talks on constitutional reform in early 2008 have made little progress.

  The legacy of the war, together with years of heavy intervention by the international organisations working in BiH, have stunted the development of the political system, contributing to the low scores for political participation and political culture. Critics say the extensive powers held by the Office of the High Representative (OHR), including the power to impose legislation and dismiss local officials, have discouraged politicians in BiH from taking responsibility for major policy decisions. BiH's overall score is pulled up by the civil liberties and electoral process categories. The better scores in these areas reflect in part the constitutional safeguards for BiH's different ethnic groups contained in the Dayton agreement.

  Democracy index
  	Overall score	Overall rank	Electoral process	Government functioning	Political participation	Political culture	Civil liberties	Regime type
  Bosnia and Hercegovina	5.70	86	7.83	3.29	4.44	5.00	7.94	Hybrid regime
  Overall and component scores are on a scale of 0 to 10; overall rank is out of 167 countries.

  Download text file (csv format)

  May 14, 2008

• Structure

  Bosnia and Hercegovina: Political structure

  Official name

  Bosnia and Hercegovina (BiH) exists within the boundaries of the former Yugoslav republic of the same name. It includes two largely autonomous entities: the Federation of Bosnia and Hercegovina and Republika Srpska (RS). It also includes a self-governing district, Brcko, under the direct authority of the central state government

  State competencies

  The central state-level BiH government was granted limited responsibilities under the 1995 Dayton peace agreement. These included the establishment of a Constitutional Court, a Commission for Displaced Persons, a Human Rights Commission, a central bank, public corporations to manage and operate transport and telecommunications, a Commission to Preserve National Monuments, and a system of arbitration. Foreign trade deals are also negotiated by the BiH government. In subsequent years ministries of justice, security and defence were also created at state level, and the state presidency assumed command of the armed forces in 2003. A unified state-wide indirect tax administration was created in the run-up to the introduction of value-added tax in 2006

  Legislatures

  BiH has a bicameral parliament comprising the House of Representatives and the House of Peoples, two-thirds of the members of which are elected from the Federation and one-third from the RS. A valid majority requires the support of at least one-third of the members representing each entity. The Federation and the RS also have parliaments

  National elections

  General elections took place on October 3rd 2010 to select a three-member state presidency, the RS president, and state, entity and cantonal parliaments. Next elections due in October 2014

  Head of state

  BiH has a rotating, collective, three-member presidency. The members are Nebojsa Radmanovic (Serb), Bakir Izetbegovic (Bosniak) and Zeljko Komsic (Croat)

  National government

  The Council of Ministers is BiH's state-level cabinet, headed by a chair, who is the country's de facto prime minister. Members serve four-year terms. The entities, the ten cantons within the Federation and Brcko district also have their own governments

  Main political parties

  Party of Democratic Action (SDA), Alliance for a Better Future (SBB), Social Democratic Party of BiH (SDP BiH), Croatian Democratic Union of BiH (HDZ BiH), Croatian Democratic Union 1990 (HDZ 1990), People's Party for Progress through Work (NSRzB), Croatian Party of Rights of BiH (HSP BiH), Alliance of Independent Social Democrats (SNSD), Serbian Democratic Party (SDS), Democratic People's Alliance (DNS), Socialist Party of RS (SPRS)

  International involvement

  The Dayton agreement established the Office of the High Representative (OHR), charged with monitoring the implementation of the agreement and co-ordinating the activities of international organisations. Since December 1997 the High Representative has been able to impose decisions in cases of disagreement and to dismiss “obstructive” officials

  National government

  Chairman: Vjekoslav Bevanda (HDZ BiH)

  Key ministers

  Civil affairs: Sredoje Novic (SNSD)

  Communications & transport: Damir Hadzic (SDP BiH)

  Defence: Zekerijah Osmic (SDP BiH)

  Finance: Nikola Spiric (SNSD)

  Foreign affairs: Zlatko Lagumdzija (SDP BiH)

  Foreign trade & economic relations: Mirko Sarovic (SDS)

  Human rights & refugees: Damir Ljubic (HDZ 1990)

  Justice: Barisa Colak (HDZ BiH)

  Security: Fahrudin Radoncic (SBB)

  Central Bank governor

  Kemal Kozaric

  High Representative

  Valentin Inzko

  Federation

  President: Zivko Budimir (HSP BiH)

  Vice-presidents:

   Mirsad Kebo (SDA)

   Svetozar Pudaric (SDP BiH)

  Prime minister: Nermin Niksic (SDP BiH)

  Deputy prime minister & minister of agriculture: Jerko Ivankovic Lijanovic (NSRzB)

  Deputy prime minister & minister of physical planning: Desnica Radivojevic (SDA)

  Key ministers

  Culture & sport: Salmir Kaplan (SDA)

  Development, entrepreneurship & crafts: Sanjin Halimovic (SDA)

  Displaced persons & refugees: Adil Osmanovic (SDA)

  Education & science: Damir Masic (SDP BiH)

  Energy, mining & industry: Eldar Trhulj (SDA)

  Environment & tourism: Branka Djuric (SDP BiH)

  Finance: Anto Krajina (HSP BiH)

  Health: Rusmir Mesihovic (SDP BiH)

  Interior: Predrag Kurtes (SDP BiH)

  Justice: Zoran Mikulic (SDP BiH)

  Labour & social policy: Vjekoslav Camber (HSP BiH)

  Trade: Milorad Bahilj (NSRzB)

  Transport & communications: Emir Bijedic (SDP BiH)

  Veterans' affairs: Zukan Helez (SDP BiH)

  Republika Srpska

  President: Milorad Dodik (SNSD)

  Vice-presidents:

   Enes Suljkanovic (SDP BiH)

   Emil Vlajki (DNS)

  Prime minister: Zeljka Cvijanovic (SNSD)

  Deputy prime ministers:

   Nada Tesanovic (SNSD)

   Jasmin Komic (independent)

  Key ministers

  Administration & local government: Lejla Resic (DNS)

  Agriculture, forestry & water management: Miroslav Milovanovic (SNSD)

  Economic relations & regional co-operation: Zeljka Cvijanovic (SNSD)

  Education & culture: Anton Kasipovic (independent)

  Family, youth & sport: Nada Tesanovic (SNSD)

  Finance: Zoran Tegeltija (SNSD)

  Health & social welfare: Ranko Skrbic (SNSD)

  Industry, energy & mining: Zeljko Kovacevic (SNSD)

  Interior: Stanislav Cadjo (SNSD)

  Justice: Gorana Zlatkovic (SPRS)

  Labour & veterans: Petar Djokic (SPRS)

  Physical planning, urbanism & ecology: Srebrenka Golic (SNSD)

  Refugees & displaced persons: Davor Cordas (HDZ BiH)

  Science & technology: Jasmin Komic (independent)

  Trade & tourism: Bakir Ajanovic (independent)

  Transport & communications: Nedeljko Cubrilovic (DNS)

  March 20, 2013

• Outlook

  Bosnia and Hercegovina: Key developments

  Outlook for 2013-17

  • The failure of Bosnia and Hercegovina (BiH) to adopt reforms, as required by the EU, prevented the coalition from applying for EU membership in 2012. Lack of consensus among BiH politicians will further delay EU integration.
  • The president of Republika Srpska (RS), Milorad Dodik, will continue to assert the powers of his entity against efforts by Western countries and Bosniak (Bosnian Muslim) leaders to strengthen central state institutions.
  • The international Office of the High Representative (OHR), which has overseen BiH's development since 1995, is likely to be phased out in 2013-14.
  • The RS and BiH's other entity, the BosniakBosnian Croat Federation, will tighten fiscal policy, as required by BiH's new agreement with the IMF, but the implementation of austerity measures will proceed slowly.
  • The Economist Intelligence Unit forecasts that, after shrinking by an estimated 0.5% in 2012, real GDP will grow by 0.4% in 2013. Growth is forecast to accelerate to an average of 2.9% a year in 2014-17 as external demand picks up.
  • The current-account deficit is forecast to shrink from an estimated 8.4% of GDP in 2012 to an average of 6.3% of GDP in 2013-14 as international oil prices decline. The deficit will widen to an average of 7.9% of GDP in 2015-17.

  Review

  • On February 26th the parliament of the RS accepted the resignation of the government led by Aleksandar Dzombic.
  • Relations between Mr Dzombic and the RS president, Mr Dodik, have been strained for some time.
  • Mr Dodik has become concerned at the erosion of support for the government in the face of the economic and social problems in the RS.
  • Industrial output in the Federation shrank by 4.3% year on year in 2012, as both external and domestic demand weakened. (The publication of 2012 industrial output data for the RS as well as other statistics had been overdue.)
  • Exports in 2012 shrank by 4.4% year on year to KM7.86bn (US$5.16bn) and imports were down by 1.8%, at KM15.25bn. The trade deficit rose by 1.2% year on year to KM7.39bn in 2012.

  March 20, 2013

Economy:

• Background

  Bosnia and Hercegovina: Economic background

  Real gross domestic product by sector
  (% share of GDP)
  	2002	2003	2004	2005	2006
  Agriculture	12.1	9.7	10.5	10.3	10.2
  Industry	21.1	19.2	19.3	19.3	19.1
  Services	61.8	65.9	65.2	65.4	66.0
  Source: Economist Intelligence Unit.

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  Physical destruction, lack of investment and failure to restructure resulted in a profound de-industrialisation of BiH during the 1990s. Industry was once the most important sector of economic activity, accounting for over 50% of GDP, and was BiH's major export sector in the late 1980s, but its share (excluding construction) has declined to about 20% of GDP. Despite significant demand for reconstruction work after the war, the construction sector has remained a relatively modest contributor to the overall economy and accounts for about 5% of GDP.

  Industrial decline in BiH has been accompanied by growth in services, which account for about 65% of GDP. A significant portion of services output is generated by the public administration and defence forces, reflecting the country's complex, multi-layered governance structure. Productive services represent a smaller share of the total, although retail trade, telecommunications and financial services have grown rapidly in recent years with help from foreign investors.

  Increasing services output, along with falling productivity in the farming sector, has pushed agricultural output down to around 10% of GDP. The share of agriculture in GDP is twice as high in Republika Srpska (RS) as in the Bosniak (Bosnian Muslim)-Bosnian Croat Federation.

  May 14, 2008

• Structure

  Bosnia and Hercegovina: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 20, 2013

• Outlook

  Bosnia and Hercegovina: Country outlook

  Bosnia and Hercegovina: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: Political stability in Bosnia and Hercegovina (BiH) remains precarious, despite the formation of a new state-level ruling coalition in February 2012. The emergence of a new government appeared to have ended a protracted political crisis that began with the parliamentary and presidential elections at state and entity levels in October 2010, but fresh disputes have since emerged. In May 2012 the decision of the Party of Democratic Action (SDA)--the main political group representing Bosniaks (Bosnian Muslims)--to vote against the 2012 budget brought it into conflict with its former ally, the Social Democratic Party of BiH (SDP BiH), which is strictly speaking not ethnically based, but receives most of its support from Bosniaks.

  ELECTION WATCH: Local elections on October 7th 2012 ended in victory for the three long-established nationalist parties, the SDA, the HDZ BiH and the Serbian Democratic Party (SDS), which dominated Bosnian Serb politics during and in the decade after the war. The big gains made by the SDS appear to indicate that the RS electorate has become disenchanted with the Alliance of Independent Social Democrats (SNSD), which has held a monopoly on core positions of power in recent years. If that trend continues, the SNSD may face a much stronger challenge at the next parliamentary election, due in October 2014, than on the previous two occasions.

  INTERNATIONAL RELATIONS: BiH has made only negligible progress in EU integration since it signed a stabilisation and association agreement (SAA) with the EU in 2008. BiH's failure to adopt constitutional amendments to end ethnically based discrimination in elections--required under a road map agreed with the European Commission in June 2012--prevented the country from submitting an EU membership application, as planned, before end-2012. The lack of progress in implementing reforms in BiH prompted EU foreign ministers in December 2012 to call for the formation of stable governments at all levels of authority so that BiH could focus on the EU agenda. The BiH authorities will need to relaunch and accelerate the reform process in 2013 if the country is not to lag behind its western Balkan peers in its EU integration. Even after BiH becomes an EU candidate, closer EU integration is likely to be hindered by the loss of appetite for further enlargement among leading EU members.

  POLICY TRENDS: The new stand-by arrangement with the IMF, together with the SAA, will set the broad policy framework for BiH during the forecast period. Under the US$521m IMF agreement, BiH will continue to concentrate on maintaining macroeconomic stability through fiscal consolidation. The Fund is calling for greater fiscal discipline, reform of the social benefits system and privatisation. Although the authorities will focus in the next few months on short-term measures to mitigate the impact on BiH of the economic downturn in the euro zone, the sale of publicly owned stakes in companies should resume during the second half of 2013. The reduction or abolition of customs duties on imports from the EU--as part of the implementation of the SAA--will continue to increase competition for many local producers. The process will be completed by the end of the forecast period.

  ECONOMIC GROWTH: We estimate that the economy entered a double-dip recession in 2012, with real GDP shrinking by 0.5% year on year. The weak performance in 2012 followed a sluggish recovery since the recession of 2009, with real GDP growing by only 1.3% in 2011. The recovery has been modest because growth in private consumption has been constrained by higher unemployment and by the measures taken to rein in the budget deficit. Several of these factors will continue to restrict growth in the short term, and the need for fiscal consolidation, as required by the IMF, will lead to additional austerity measures to narrow the budget deficit.

  INFLATION: Consumer price inflation slowed to an annual average of 2.1% in 2012 from 3.7% in 2011, mainly because of weakening domestic demand. We forecast that inflationary pressures in 2013 will be kept in check by lower international oil prices, high unemployment and further cuts in public-sector wages. In 2014-17 a modest pick-up in domestic demand will lead to stronger inflationary pressures, with the consumer price index rising by an average of 3.1% a year.

  EXCHANGE RATES: Concerns that the convertible marka may be overvalued have been eased by a sharp weakening of the euro, to which the marka is pegged. We forecast a further modest depreciation of the euro during 2014-15. Competitiveness will also be improved by cuts in public-sector pay, which are likely to depress wages across the board. The Central Bank maintains sufficient reserves to cover the whole of its monetary liabilities. Further IMF funding and increased remittances should help to increase reserves in the forecast period.

  EXTERNAL SECTOR: The import costs of energy, which are estimated to have remained stable in 2012, are forecast to decline in 2013, reflecting a subdued global economic recovery. Import demand is set to remain sluggish in 2013 as private consumption stagnates and the need for fiscal consolidation limits new infrastructure investment. The recession in the euro zone in 2013 will constrain demand for exports. In subsequent years exports should rebound, benefiting from faster growth in the EU and relatively high international aluminium prices. Given lower import prices and weak domestic demand, we forecast a contraction in the current-account deficit to 6.3% of GDP on average in 2013-14, compared with an estimated deficit of 8.4% of GDP in 2012. We forecast that, following a modest rebound in global commodity prices and stronger domestic demand, the current-account deficit will widen to an annual average of 7.9% of GDP in 2015-17.

  March 25, 2013

• Forecast

  Bosnia and Hercegovina: 5-year forecast summary

  Outlook for 2013-17: Forecast summary

  Forecast summary
  (% unless otherwise indicated)
  	2012a	2013b	2014b	2015b	2016b	2017b
  Real GDP growth	-0.5	0.4	2.0	2.9	3.2	3.3
  Industrial production growth	-4.3	2.5	3.8	4.0	4.5	4.5
  Average lending rate (%)c	7.3	7.2	7.4	7.5	7.8	7.8
  Consumer prices (av; % change)	2.1d	1.9	2.5	3.0	3.3	3.5
  Exports of goods fob (US$ bn)	5.2	5.3	5.5	5.9	6.4	6.9
  Imports of goods fob (US$ bn)	-10.1	-10.0	-10.3	-11.1	-12.0	-12.9
  Current-account balance (US$ bn)	-1.5	-1.2	-1.1	-1.4	-1.6	-1.8
  Current-account balance (% of GDP)	-8.4	-6.5	-6.0	-7.4	-8.0	-8.4
  External debt (year-end; US$ bn)	10.9	11.3	11.7	12.0	12.4	12.8
  Exchange rate KM:US$ (av)	1.52d	1.47	1.49	1.54	1.55	1.55
  Exchange rate KM:US$ (end-period)	1.49d	1.48	1.50	1.56	1.55	1.55
  a The Economist Intelligence Unit estimates. b The Economist Intelligence Unit forecasts. c Period average. d Actual.

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  March 20, 2013

View detailed map

Country Briefing

Land area

51,209 sq km (14% arable, 20% pasture and 40% forest)

Population

4.3m at the last census (1991); estimated at 3.84m in mid-2007

Main towns

Population in '000 (a) (1991):

 Sarajevo (capital): 526

 Banja Luka: 195

 Zenica: 146

 Tuzla: 132

 Mostar: 126

 Prijedor: 112

(a) There have been considerable unrecorded changes owing to the war in 1992-95. The population of most towns has increased greatly as a result of refugee movements during the war

Climate

Continental in Bosnia and parts of Hercegovina; sub-Mediterranean in southern Hercegovina

Weather in Sarajevo

Hottest month, July, 18-23°C; coldest month, December, 0-2°C; wettest month, June, 110-115 mm average rainfall; driest month, December, 20-70 mm average rainfall

Languages

Bosnian, Serbian, Croatian (which are very similar, with the exception of the use of the Cyrillic alphabet in Serbian)

Measures

Metric system

Currency

The convertible marka (KM), subdivided into 100 pfenig, was introduced in June 1998 at a fixed rate of KM1:DM1 (since the introduction of the euro, KM1.96:€1)

Time

One hour ahead of GMT in winter; two hours ahead in summer

Fiscal year

Calendar year

January 09, 2013