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Bosnia Herzegovina Business Forecast Report Q4 2008Published by: Business Monitor International Published: Jul. 28, 2008 - 47 Pages Table of Contents
AbstractOutlook Still Positive, But Bosnia Is LaggingBosnia remains one of the poorest states in emerging Europe, ranking 19th in GDP per capitaterms out of a peer group of 8 states, and we expect it to fall further behind by the end of ourforecast period in 01 . There is not one single reason behind the slow speed to convergence,but the fractious political scene continues to hinder faster reform, and foreign direct investment isnot being attracted in large enough quantities into productive industries. A better regulatory environmentis necessary to attract more foreign capital, as is continued adherence to the pathwaytowards EU membership. These moves are essential in order to bring down the still excessivelyhigh unemployment rate. According to ILO data, unemployment stood at a huge 9% last year,and the participation rate was just .9%. The participation rate rose 0.8pp last year, and theimprovement this year should hopefully be significantly greater than this. However, this will notchange the underlying trend of very low labour market participation across the country. Bosnia has signed a Stabilisation and Association Agreement (SAA) with the European Union,which put the country on a course towards eventual membership of the bloc. This will provide astrong political and economic reform anchor for Bosnia, and confirm the Union’s commitment tohelping with this process. However, the SAA is simply the first main way-stage on the route tomembership, and with the current ructions surrounding the Irish rejection of the Lisbon Treaty,the existing members are unlikely to be in any hurry to further enlarge the already unwieldy EUdecision-making bodies. Both the EU and Bosnia will need to reform before another large roundof EU enlargement can take place. Real GDP growth is forecast to average 6.4% over our five-year forecast period. This is solid,but still means that the country will lag behind regional peers, and that living standards are set toremain low. The key risk to the outlook is still the fiscal position, with a co-ordinated fiscal strategyfor the state level government and two entity administrations lacking. Not only is spending beingduplicated between the various levels of government, but there has been insufficient control oversocial spending. Government revenue came in last year at a block-buster 6% of GDP. The upshotof this is that the private sector is being crowded. Bosnia is a net energy importer with no domestic hydro-carbon extraction industry. This could beabout to change with the return of oil prospecting to the country. Early indications are that reservescould cover 1 - 0 years of domestic consumption, which would be excellent news for the localeconomy. However, more work is also needed on local energy infrastructure, which is far frombeing able to guarantee stable long-term supplies. The absence of cheap and reliable electricityis already causing problems for some local firms, and could yet result in major difficulties in theprivatisation of aluminium company Aluminij Mostar. Get Full Details About This Report >> |
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