Bosnia-Herzegovina

In-depth country-focused analysis on Bosnia-Herzegovina's economic, political and operational risk environment, complemented by detailed sector insight

Bosnia-Herzegovina

Our comprehensive assessment of Bosnia-Herzegovina's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Bosnia-Herzegovina, as well as the latest industry developments that could impact Bosnia-Herzegovina's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Bosnia-Herzegovina before your competitors.

Country Risk

Bosnia-Herzegovina Country Risk

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Core Views

  • Partisan maneovring, ethnic divisions, and complex governing structures combine to make Bosnia-Herzegovina's political system largely dysfunctional. With few signs that radical improvements are forthcoming in even after last year's elections, we expect the country to muddle through in the coming years, with frustrating delays to badly-needed reforms.

  • The economy has shown considerable resistance to the catastrophic floods that hit the country in summer 2014, with the downturn in growth and public finances not as severe as initially thought.

  • Budget policy will continue to be guided by the government's Stand-By Agreement with the IMF - which we expect to be extended beyond June 2015 - though budget execution will still be affected by political disputes.

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Bosnia-Herzegovina Operational Risk Coverage (9)

Bosnia-Herzegovina Operational Risk

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BMI View: Bosnia-Herzegovina offers a poor operating environment with significant operational risks mainly relating to poor transport infrastructure, the limited size of the labour force and weak cross border relationships. The country has a relatively open investment climate, with no restrictions on foreign direct investment and a low rate of corporate income tax. However, Bosnia's small market size, complicated regulatory structure and weak rule of law are major deterrents for investors. Bosnia therefore receives a low overall score of 45.5 out of 100 in our...

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Bosnia-Herzegovina Crime & Security

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BMI View: Investors in Bosnia-Herzegovina do face considerable risks originating in the complex and frequently volatile domestic political environment and wider interstate relationships. The division of the country under the post war Dayton Agreement has given rise to a multitude of issues including a fragmented police force, limited regulatory cooperation and varying legislation. Businesses do, however, stand to benefit from the very low crime rate in the country, which reduces the need for additional security or insurance.

Bosnia has contentious relationships with its neighbouring states, including multiple border disputes with Croatia, Serbia and Montenegro. Risks...

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Bosnia-Herzegovina Labour Market

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BMI View: Businesses operating in Bosnia face a limited availability of skilled labour and high costs associated with employing workers. The country's education system has suffered considerable setbacks due to the upheaval of the civil war in the 1990s and the ethnic divisions entrenched by the subsequent peace process. This has had a negative impact on the skill level of the work force and also inspired mass emigration of skilled workers. Consequently, businesses requiring highly skilled workers will be forced to import foreign labour. In addition, vocational skills are lacking due to high unemployment and the prevalence of the informal agricultural sector. Businesses therefore face considerable training costs for Bosnian workers, which are increased by the relatively high minimum wage and labour taxes. In light of this, Bosnia is placed 29th...

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Bosnia-Herzegovina Logistics

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BMI View: An historical lack of sufficient investment in the country's transport network has resulted in Bosnia and Herzegovina's road, rail and air transport connections being left unable to cope with increased demand. Much of the logistics network was damaged during the 1992-1995 Bosnian War and without significant improvement works businesses face potentially costly supply chain disruptions. Businesses do stand to benefit from competitive electricity and fuel costs, though we do note that Bosnia's reliance on imported fuel from Russia leaves the country highly vulnerable to interruptions to supply and escalating prices. As such, Bosnia and Herzegovina has an overall score of 39.4 out of 100 on the BMI Logistics Risk Index. This places the country an uncompetitive 28...

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Bosnia-Herzegovina Trade & Investment

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BMI View: Bosnia-Herzegovina's moderate level of economic openness with regard to foreign direct investment does little to relieve investors from the burden of a complicated and fragmented regulatory structure. The country's operating environment is characterised by a time-consuming, non-transparent process to open a business and the risk of double inspections and fees because of the overlapping jurisdictions of fragmented state and cantonal authorities. The most significant risk to investors is posed by the weak rule of law and meagre protection of property rights in Bosnia. In BMI ...

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Bosnia-Herzegovina Industry Coverage (5)

Commercial Banking

Bosnia-Herzegovina Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Defence & Security

Bosnia-Herzegovina Defence & Security

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BMI View:  Political instability remains the key security concern in Bosnia in the near term. Bosnia's candidacy for EU membership is still undergoing negotiation and is expected to be finalised following the country's general election in October 2014. Security threats stem from a number of issues including: threats of Serb succession; regional developments with Croatia and Kosovo; porous borders facilitating organised crime and the black market trade in arms.

We expect Bosnia to spend up to USD249.8mn on defence in 2014. Up to 2019 we expect Bosnia to spend an average of USD257.1mn on defence each year. Towards the end of the forecast period, we expect Bosnia to be spending USD278.5mn on defence annually. Although the trend of Bosnian defence spending has been broadly upwards during the forecast period, the country has not...

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Infrastructure

Bosnia-Herzegovina Infrastructure

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BMI View: Building permits issued and completed dwellings fell significantly year-on-year in Q115, and while overall construction works were up 0.5% quarter-on-quarter, this represents the second quarter of slowing growth. Post-election political instability and a lack of clear leadership, combined with the knock-on effects of devastation from the 2014 floods, has left the building industry faltering, despite the need for reconstruction and the aid coming in to support this. On the upside, now a government has been formed and a 2015 budget approved, confidence may begin to return to the sector in the medium term.

Key Trends And Developments

  • Positive steps are being taken towards the development of a West Balkan transport...

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Real Estate

Bosnia-Herzegovina Real Estate

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BMI View: The commercial real estate sector in Bosnia-Herzegovina continues to be affected by low demand and high vacancy rates. Activity is expected to remain subdued in the short term, but over the long term there is significant potential in the market. We believe that interest from international occupiers and real estate developers will increase and lead to the development of the sector in the years ahead.

Following challenging economic conditions in 2014 caused by the severe regional flooding, the economic picture in Bosnia-Herzegovina has been improving this year and the country is forecast to see economic growth of 1.7% in 2015. Domestic demand and investment will positively contribute to economic growth. We expect continued economic expansion in 2016 with growth predicted to be 2.8%, before levelling off at the same rate over the remainder of the forecast period.

In the office sector,...

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Telecommunications

Bosnia-Herzegovina Telecommunications

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BMI View: The leading Balkan states - including Bosnia & Herzegovina - implemented new, lower, mobile roaming rates at the beginning of July 2015. This will put pressure on operators to become more innovative with regards to services and pricing and those with a wireline and/or pay-TV business will be best positioned to weather the fall in core service revenues. The two struggling MVNOs will struggle to operate profitably, benefiting cable companies looking to break into the mobile market with low-value offers. The government is seriously considering privatising BH Telecom and HT Eronet ; greater access to finance will improve these players' ability to invest in new infrastructure and services, but will still have to wait for...

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Latest Bosnia-Herzegovina Articles

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  • We analyse presidential, legislative and regional elections that have taken...