Bosnia and Herzegovina (BiH) is a transitional economy with a rapidly declining population of about 3 million. BiH consists of two entities: the Federation of BiH (the Federation) and the 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 became an EU candidate country in 2022 in a move that was widely acknowledged as a political decision rather than a reflection of significant progress on necessary reforms. BiH is also pursuing World Trade Organization membership, with the Russian Federation as the only pending bilateral market access agreement.
The BiH economy has fully recovered from the COVID-19 pandemic, but still records low levels of economic growth compared to its peers in the region. According to IMF estimates, real GDP growth is expected to decline from 3.8 percent in 2022 to 2 percent in 2023, rising to 3 percent in 2024. 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 raw materials and low value goods rather than services.
BiH imports almost twice as much as it exports: 2022 imports totaled $15.39 billion against exports of $9.68 billion. The country finances this trade deficit through extensive remittances from the 2 million-strong BiH diaspora living outside the country. The EU is BiH’s largest trading partner, importing $7.1 billion from BiH (73 percent of BiH’s total exports) and exporting $8.74 billion to BiH (56 percent of BiH’s total imports) in 2022. Overall, 63 percent of BiH’s trade in 2022 was with the EU. Central European Free Trade Agreement (CEFTA) countries comprise the next tier of trading partners but are well behind the EU. BiH exported $1.78 billion to CEFTA countries (18 percent of total exports) and imported from CEFTA countries $1.89 billion (12 percent of total imports) in 2022, which is approximately 14.6 percent of BiH’s total trade. BiH has significant trade with its two biggest neighbors, exporting $1.44 billion to and importing $1.52 billion from Croatia, and exporting $1.27 billion to and importing $1.64 billion from Serbia in 2022.
In 2022, U.S. exports to BiH increased by 59 percent, as compared to the same period in 2021, to $512 million. U.S. products and services held a 3.4 percent share of total BiH imports in 2022. U.S. exports to BiH are primarily in the areas of agricultural products, machinery and transport equipment, chemicals and mineral fuels, and raw materials for industrial processing. BiH exports to the United States in 2022 totaled $96 million, an increase of 2 percent over 2021 exports. BiH’s primary exports to the United States are leather products, apparel manufacturing products, and furniture and fixtures.
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. U.S. companies in BiH include major multinational and market leaders in their respective sectors, such as Coca-Cola, Microsoft, Cisco, Oracle, Pfizer, KFC, Marriott, NCR, Caterpillar, Johnson & Johnson, FedEx, UPS, Philip Morris, PepsiCo, KPMG, Deloitte, Ernst &Young, and others.
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.
Political Environment
Visit State Department’s website for background on the country’s political and economic environment.