Bosnia and Herzegovina's Economic Prospects and Historical Background

Laura Kromjak ()
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Laura Kromjak: Tomori Pal College

Financial and Economic Review, 2021, vol. 20, issue 2, 148-169

Abstract: The essay discusses the socio-political challenges for the economy of Bosnia and Herzegovina and its foreign trade in goods and services, including the Hungarian relation. The study uses descriptive tools and secondary data. Wedged in between Croatia and Serbia, Bosnia and Herzegovina's economy is inextricably linked to the dramatic events of the past and the still unresolved social and political conflicts. Within Yugoslavia, Bosnia and Herzegovina was a member state with significant export potential, but the war and ethnicisation have devastated the economy. The state administration of the Dayton system is expensive, and the foundations for capital flows, privatisation and European convergence are developing slowly. Capital flows, the Instrument for Pre-accession Assistance (IPA) and international aid play an important role in balancing the foreign exchange balance. A significant item reducing the negative current account balance is the amount of remittances, which is six times higher than FDI. Remittances have become the largest source of external financing, increasing dependency and exacerbating the vulnerability of the economy.

Keywords: Bosnia and Herzegovina; trade balance; foreign exchange remittance; direct capital investment; EU integration process (search for similar items in EconPapers)
JEL-codes: F14 F21 F24 F34 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:mnb:finrev:v:20:y:2021:i:2:p:148-169

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