Bosnia and Herzegovina has made significant progress in development on the way to membership in the European Union, but economic and energy structural reforms are needed for further progress, as well as better coordination of all levels of government in BiH, according to the latest comprehensive analysis of the World Bank.
In the latest “Economic memorandum for the country”, the transition of employment in BiH towards industry and services was emphasized, along with the maintenance of a responsible fiscal policy, which made it possible to maintain the public debt at relatively low levels.
In addition, BiH has made significant progress in reducing the external current account deficit, which fell to a record low of 2.5 percent of gross domestic product (GDP) in 2021, the World Bank announced.
“However, BiH still faces challenges, since in terms of cumulative real GDP it lags behind the countries in the region, and the standard of living is approximately at the level of a third of the EU average,” the report states.
The report also emphasizes the urgency of deep structural reforms aimed at strengthening growth and progress towards a fully functional market economy and EU membership.
The head of the World Bank Office for BiH and Montenegro said that the Bank is committed to providing support to BiH in promoting resilient and green growth, while aligning with EU standards.
According to the report, reforms and further progress are needed in five strategic areas: good macroeconomic management and digitization, development of the labor market, enabling the exploitation of the productive potential of companies, facilitating access to financing, increasing competitiveness through energy and mining policies.
The aim of the specific measures recommended in these five areas is to improve the dialogue on fiscal policy, increase the efficiency and productivity of companies, encourage the opening of companies and facilitate exports to the EU.
“The upcoming EU Carbon Border Adjustment Mechanism (CBAM) is expected to significantly affect exports from BiH, especially from sectors that depend on coal and high carbon emissions. This further emphasizes the urgency of switching to renewable energy and harmonizing with international standards in order to strengthening of competitiveness,” the World Bank points out.
The report states that the aging of the workforce and the slowdown in productivity further indicate the need for comprehensive reforms of the labor market, as well as that initiatives such as targeted social transfers, gender equality policies and support to the private sector are of key importance for strengthening economic dynamism and inclusiveness.
In order to fulfill the aspirations of the people of Bosnia and Herzegovina, the authorities at all levels should cooperate to achieve common goals and develop a joint program of reforms that will increase the country’s economic opportunities, the report states.
The World Bank believes that the engagement of actors outside the government, including the private sector and civil society, is crucial for the development and implementation of effective policies.
Senior economist of the World Bank and co-author of the report, Tihomir Stučka, said that Bosnia and Herzegovina has progressed partly thanks to the implementation of effective fiscal policies and prudent macroeconomic management.
Tučika added that the basic challenges are still present and require the implementation of comprehensive economic and energy reforms, not only for the purpose of solving current problems but also for laying the foundations for strong long-term growth.
