Financial Crime World

Economic Overview of Bosnia and Herzegovina: Challenges and Progress

Governance Structure and Accounting Standards

Bosnia and Herzegovina has a complex governance structure with three constituent peoples: Bosniaks, Serbs, and Croats. This structure is characterized by asymmetric government structures in the two Entities (FBH and RS), with FBH being subdivided into 10 cantons and RS being more centralized.

  • Challenges in Governance: The country’s complex governance structure remains a subject of political debate and controversy.
  • Accounting and Auditing Standards: Bosnia and Herzegovina has three official languages: Bosnian, Croatian, and Serbian, which poses a challenge for accounting and auditing standards.

International Cooperation and Progress

The cooperation between the RS and Serbia, as well as between FBH and Croatia, will help give Bosnia and Herzegovina access to international accounting and auditing standards. The country achieved an important milestone in June 2008 when it signed a Stabilization and Association Agreement with the European Union.

  • Access to International Standards: Cooperation with neighboring countries will facilitate the adoption of international accounting and auditing standards.
  • Stabilization and Association Agreement: Bosnia and Herzegovina’s agreement with the European Union marks an important step towards adopting international standards.

Economic Development

Bosnia and Herzegovina has seen robust economic growth in recent years, driven by private sector investment and reconstruction efforts. However, the economy fell into recession in 2009 due to the global economic crisis.

  • Economic Growth: The country’s strong economic growth before 2009 was driven by private sector investment and reconstruction efforts.
  • Global Economic Crisis: The recession in 2009 highlighted the vulnerability of Bosnia and Herzegovina’s economy to external shocks.

Current Economic Situation

Foreign reserves started to drop in 2009, but the fall was not alarming. The country’s current account deficit has been financed by foreign direct investment, grants, and foreign borrowing.

  • Foreign Reserves: Although the decline in foreign reserves is a concern, it is not an alarming trend.
  • Current Account Deficit: Foreign direct investment, grants, and foreign borrowing have helped finance Bosnia and Herzegovina’s current account deficit.