Bosnia and Herzegovina - Country Commercial Guide
Market Overview
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Bosnia and Herzegovina (BiH) is a transitional economy with a rapidly declining population of less than 3.5 million.  In 2020, BiH GDP was $19.95 billion and per capita GDP was $6,080 with total nominal GDP of approximately $20.05 billion.  In 2021, BiH’s economy is estimated to have expanded by 7.1 percent according to the World Bank.  The World Bank expects BiH’s economic output to increase by 2.7 percent in 2022, 0.3 percentage points below the forecast the bank made in January 2022.  In 2023 BiH’s gross domestic product is projected to grow by 3.1 percent, the World Bank predicted in its June 2022 Global Economic Prospects report.  The European Bank for Reconstruction and Development (EBRD) estimated that BiH’s GDP grew by 7.1 percent in 2021.  The European Bank for Reconstruction and Development expects Bosnia and Herzegovina’s economy to expand by 3 percent in 2022, revising upwards its previous projection by 0.7 percentage points, and by 3 percent in 2023 as well.  Economic growth in BiH is primarily driven by consumption and, to some extent, by public investment.  BiH is tied closely to global value chains as it primarily exports low value goods rather than services.

BiH has been a potential candidate country for European Union (EU) accession since 2003.  Although BiH’s progress toward EU accession has been slow, the country’s Stabilization and Association Agreement (SAA) entered into force on June 1, 2015.  BiH submitted its formal application for EU membership on February 15, 2016.  In early 2019 the Government of BiH completed the European Commission’s (EC) Questionnaire and the EC officially released its Opinion on May 29, 2019, identifying fourteen recommendations for BiH to complete before it could receive candidate status.  BiH is also pursuing World Trade Organization membership, with the Russian Federation as the only pending bilateral market access agreement.

BiH consists of two entities: The Federation of BiH (the Federation) and Republika Srpska (RS).  A third, smaller area, the Brčko District, operates under separate self-administration.  The Federation is further divided into ten cantons, each with its own government and responsibilities.  Both entities and the Brčko District are also comprised of municipalities.  As a result, BiH has a multi-tiered legal and regulatory framework that is often duplicative and contradictory and creates opportunities for corruption.  BiH struggles to attract foreign investment due to complex labor and pension laws, the lack of a single economic space, and inadequate judicial and regulatory protections that deter foreign direct investment.  According to the BiH Central Bank, foreign direct investment (FDI) in BiH in 2021 was $511 million, a 22 percent increase from the same period in 2020.  The all-time high for FDI was $2.1 billion in 2007.  Most investments came from Austria, Croatia, Serbia, Slovenia, and Germany.

BiH imports almost twice as much as it exports: 2021 imports totaled $13.03 billion against exports of $8.6 billion.  The country finances this trade deficit through extensive remittances from the 2 million-strong BiH diaspora living outside the country.  In 2021, U.S. exports to BiH increased by 37 percent, from $235 million in 2020 to $322 million. U.S. products and services held a 3 percent share of total BiH imports in 2021.  U.S. exports to BiH are primarily in the areas of agricultural products, machinery and transport equipment, mineral fuels, and raw materials for industrial processing.  Primary BiH exports to the United States are leather products, apparel manufacturing products, furniture and fixtures, and petroleum and coal products.  BiH exports to the United States in 2021 totaled $94 million, an increase of 135 percent over 2020 exports.

The EU is BiH’s largest trading partner, importing $6.27 billion from BiH (73 percent of BiH’s total exports) and exporting $7.68 billion to BiH (59 percent of BiH’s total imports).  Overall, 64 percent of BiH’s trade is with the EU.  Central European Free Trade Agreement (CEFTA) countries comprise the next tier, but are well behind the EU.  BiH exports $1.45 billion to CEFTA countries (17 percent of total exports), and imports from CEFTA countries $1.67 billion (13 percent of total imports), which is approximately 14.3 percent of BiH total trade.  BiH has significant trade with its two biggest neighbors, exporting $1.12 billion to and importing $1.16 billion from Croatia, and exporting $1.04 billion to and importing $1.46 billion from Serbia.

BiH operates a currency board arrangement by which the Bosnian Convertible Mark (KM) is pegged to the euro (One euro = KM 1.958).  As a result, the KM is one of the most stable currencies in Southeast Europe. 

U.S. companies in BiH include major multinational and market leaders in their respective sectors, such as Coca-Cola, Microsoft, Cisco, Oracle, Pfizer, McDonalds, Marriott, NCR, Caterpillar, Johnson & Johnson, FedEx, UPS, Philip Morris, KPMG, Price WaterHouse Coopers, and others.

U.S. investment in BiH is low due to its small market size, relatively low income levels, distance from the United States, challenging business climate, and the lack of investment opportunities.  Most U.S. companies in BiH are represented by small sales offices that are concentrated on selling U.S. goods and services, with minimal longer-term investments in BiH.

Political & Economic Environment:  State Department’s website for background on the country’s political environment.