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 relate to the conflict-prone region, poor transport infrastructure and the limited size of the labour force. 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 39.3 out of 100 in our Operational Risk Index. This ranks Bosnia 146...

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Bosnia-Herzegovina Crime & Security

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BMI View: Bosnia-Herzegovina's domestic security situation is far more stable than it was two decades ago, and improving regional relations, in tandem with the EU accession process, are reducing the threat of interstate conflict or a relapse into civil war. In addition, the crime rate is low on a regional scale, posing few risks to foreign workers and businesses. However, the peace agreement which ended the 1992-1995 civil war has entrenched ethno-religious divisions, and the reconciliation process is ongoing. The Muslim population is at risk from radicalisation by Islamist terror groups and low-scale terrorist attacks are an underlying threat. Bosnia's low overall score for Crime and Security Risks reflects this terrorist threat as well as the historic regional instability. At 34.6...

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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: Bosnia-Herzegovina's logistics network suffered considerably during the 1992-1995 Bosnian War, during which damage to utilities and transport infrastructure was extensive. With limited subsequent investment in the improvement of the logistics network, investors face risks of higher costs and disruption to supply chains. Although businesses currently benefit from competitive electricity and fuel prices, Bosnia's lack of domestic resources and reliance on Russian fuel mean that there is a higher risk of supply shortage and increase of costs. These factors have...

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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: We have adjusted downwards our 2014 estimate and 2015-2016 forecasts for infrastructure industry growth in light of underlying political uncertainty, an economy struggling for a growth foothold and a poor outlook for public and private investment. Our 2014 industry growth estimate has moved substantially lower from the previous quarter's 10.8% to 5.8%, while our 2015 and 2016 forecasts will hold a muted 1.8% each year. Further, a slow start to reconstruction after 2014's severe floods has impacted our forecasts. However, 2015-2016 should see greater project initiation and therefore a gradual boon for...

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Real Estate

Bosnia-Herzegovina Real Estate

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BMI View: The outcome of October 2014's general election is likely to have done little to ease investors' fears surrounding the stability of the Bosnia-Herzegovina commercial real estate sector.   The country currently ranks bottom of BMI's Central and Eastern Europe Risk/Reward Index,   while economic growth has been largely stagnant over recent quarters. That said, we maintain that the real estate sector holds   long-term potential for foreign investors.  

The year 2014 has been difficult for the Bosnia-Herzegovina commercial real estate sector as a number of economic and political headwinds contrived to dent the country's already fragile...

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Telecommunications

Bosnia-Herzegovina Telecommunications

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BMI View: The Bosnian telecommunications sector remains one of the least attractive markets in the Central and Emerging Europe (CEE) region. Although alternative wireline operators are beginning to make headway, the most potent of these are owned by Telekom Slovenije , a weakening presence on the international investment stage. Consolidating these assets under a stronger player would benefit Bosnian consumers. The mobile market is recording nominal growth due to saturation and low consumer spending power conspires to impede the take-up of 3G services. The rollout of 4G would encounter similar headwinds. Convergence is providing the only significant growth driver as consumers look to maximise value for money by buying three or more services in a single package. MVNOs should be able to capitalise on these trends, but they have made...

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Latest Bosnia-Herzegovina Articles

  • The recent oil price rally has overshot the extent of the bullish shift in ...

  • We forecast global real GDP growth of 3.0% in 2015, a rise from the 2012-14...

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