August 23, 2012
by Ina Dimireva
— last modified January 30, 2017
Bosnia and Herzegovina – along with other Western Balkan countries – was identified as a potential candidate for EU membership at the European Council summit in Thessaloniki in June 2003. Since then, a number of agreements between the EU and Bosnia and Herzegovina entered into force – visa facilitation and readmission agreements (2008), Interim Agreement on Trade and Trade-Related Issues (2008). The Stabilization and Association Agreement (SAA) was ratified and entered into force on June 1, 2015.
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Member of the Schengen area: No
Political system: Republic
Capital city: Sarajevo
Total area: 51,209 km²
Population: 4.6 million
Currency: Bosnian convertible mark
Overview of the economy
Bosnia has an economy in transition with limited market reforms. The economy relies heavily on the export of metals, energy, textiles and furniture as well as remittances and foreign aid. A highly decentralized government hinders economic policy coordination and reform, while excessive bureaucracy and a segmented market discourage foreign investment. Foreign banks, mainly Austrian and Italian, now control most of the banking sector. The konvertibilna marka (convertible mark or BAM) – the national currency introduced in 1998 – is pegged to the euro, and confidence in the currency and in the banking sector has remained stable.
The inter-ethnic war in Bosnia and Herzegovina caused an 80% drop in production between 1992 and 1995 and a surge in unemployment, but the economy grew until 2008, when the global economic crisis caused a slowdown. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007.
Bosnia’s private sector is growing slowly, but foreign investment has fallen sharply since 2007. Public spending – including transfer payments – remains high, at around 40% of GDP, due to redundancy in government offices at levels national, subnational and municipal. High unemployment remains the most serious macroeconomic problem. The successful implementation of a value-added tax in 2006 provided a stable source of revenue for the government and helped curb gray market activity. National statistics have also improved over time, but much economic activity remains unofficial and unrecorded. Bosnia and Herzegovina’s main economic priorities are: accelerating integration into the EU; strengthen the tax system; public administration reform; Membership of the World Trade Organization; and ensure economic growth by promoting a dynamic and competitive private sector.
General
Bosnia and Herzegovina – along with other Western Balkan countries – was identified as a potential candidate for EU membership at the European Council summit in Thessaloniki in June 2003.
Since then, a number of agreements between the EU and Bosnia and Herzegovina have entered into force – agreements to facilitate visas and readmission (2008), and the interim agreement on trade and trade-related issues (2008).
Common foreign and security policy and European security and defense policy
The EU continues to deploy considerable resources in Bosnia and Herzegovina under the Common Foreign and Security Policy (CFSP) and the European Security and Defense Policy (ESDP). The current EU Special Representative (EUSR), Peter Sorensen, is also head of the European Union delegation.
The EUFOR/Althea mission continues to be present in Bosnia and Herzegovina. Following the improvement in the security situation, EUFOR/Althea forces were reduced from 6,000 to around 2,000 troops. The mandate of the EU Police Mission (EUPM) was extended until the end of June 2012. The EUPM continues to focus on police reform, as well as the fight against organized crime and corruption.
Useful links
EU Delegation to Bosnia and Herzegovina
Government of Bosnia and Herzegovina
Source: Europa, The World Factbook