On 17 May 2019, representatives of the EU Member States, the Western Balkans and Turkey, the European Commission and the European Central Bank, as well as representatives of the central banks of the Western Balkans and Turkey met in Brussels for their annual economic policy dialogue. Participants took note of the European Council’s Conclusions of 26 June 2018 on enlargement and the stabilization and association process and recalled the commitment to set out a new set of targeted policy guidance to support efforts towards fulfilling the Copenhagen economic criteria. The Western Balkans and Turkey were encouraged to continue to improve their macroeconomic, budgetary and structural policies.
The Joint Conclusions of the meeting take note that Bosnia and Herzegovina’s Economic Reform Programme (the ERP) envisages modestly accelerating growth over the next two years, on the back of stronger private consumption driven by increased employment and low inflation; surpluses on fiscal accounts remain based primarily on containing the public sector – both current and investment – spending. This, however, does not sufficiently address the countries’ key challenges. Moreover, as in the rest of the region, further efforts are needed to tackle corruption, improve the rule of law and strengthen institutions in order to promote competitiveness. Addressing these fundamental concerns is a prerequisite for a successful transformation of the economy.
The conclusions further identify the main structural challenges BiH needs to address in order to boost competitiveness and long-term and inclusive growth: (i) enhancing the business environment through the creation of a single economic space, (ii) facilitation of starting a business, (iii) making the public sector more efficient, in particular improving the performance, transparency and accountability of public enterprises, and (iv) improving labour market transitions.
In this context, Bosnia and Herzegovina is invited to implement the following policy reforms:
- Strengthen medium-term macro-fiscal planning; Enhance public-sector transparency in terms of employment, payment arrears and contingent liabilities. Improve timeliness and comprehensiveness of statistics on government finance, national accounts and labour market
- Increase public investments while containing spending on public sector wages, and improving targeting of social transfers,
- Safeguard the integrity of the currency board arrangement and the independence of the central bank in order to maintain monetary stability, while at the same time preserving financial sector stability.
- Improve governance and transparency of public enterprises and adopt and implement a credible and relevant country-wide Public Financial Management strategic framework with a performance based monitoring and reporting system.
- Simplify and harmonise business registration, licensing and permit procedures between entities; make steps towards reducing para-fiscal fees and charges, and
- Improve secondary and higher education enrolment policies and link them with labour market needs; take steps towards incentivising formal employment, including reducing the tax wedge; take steps to ensure public employment services’ capacities are used for more active support to jobseekers.