Structural Weaknesses in the Economy of Bosnia and Herzegovina – A Brake on Growth and Development

Abstract

To present the status and development of economies of the countries, a number of macroeconomic indicators is available and used and the most important aggregate in the system of national accounts is the gross domestic product (GDP).

An analysis of GDP serves to present the status and trends of the economy of Bosnia and Herzegovina (BiH). We have used the comparison method, in order to establish the status, as well as trends in the economy of BiH in comparison with the neighbouring countries with similar GDP structures and with economies of some developed countries.

We note that the structure of gross value added (GVA) in BiH is not primarily oriented towards profitable activities, nor towards activities giving a synergistic effect on the entire economy. The service sector is not sufficiently developed. GDP per capita in 2015 was almost eight times lower than the one recorded in the EU member countries. The relationship between consumption and investment, in addition to the negative balance of trade, are negative determinants of the BiH economy. The global crisis has produced negative effects on the BiH economy. Such trends were imminent even in the developed countries, the only difference is that the developed countries, by size of their GDP per capita, are far stronger and more developed than the BiH economy. The economy is small in its size and growth rates are not sufficient to provide a visible progress, as is the case with developed countries.

BiH needs to put maximum efforts into increasing its value added in areas that are fast and strong in contributing to the growth and development.