Economy

GDP (2001 est., purchasing power parity): $4.7 billion.
GDP growth rate ( 2001 est.): 2.3%.
Income per capita (1997 est., purchasing power parity): $1,800 (note: figure heavily depends on the population and does not account for the gray economy).
Inflation rate (2001 est.): 5.0%.
Natural resources: Coal, iron, bauxite, manganese, forests, copper, chromium, lead, zinc.
Agriculture: Products--wheat, corn, fruits, vegetables, livestock.
Industry: Types--steel, minerals, vehicle assembly, textiles, tobacco products, wooden furniture, tank and aircraft assembly, domestic appliances, oil refining.
Trade (1995): Exports--$1,003 million.
Next to Macedonia, Bosnia and Herzegovina was the poorest republic in the old Yugoslav Federation. For the most part, agriculture has been in private hands, but farms have been small and inefficient, and food has traditionally been a net import for the country. The centrally planned economy has resulted in some legacies in the economy. Industry is greatly overstaffed, reflecting the rigidity of the planned economy. Under Tito, military industries were pushed in the republic; Bosnia hosted a large share of Yugoslavia's defense plants. Three years of interethnic strife destroyed the economy and infrastructure in Bosnia, caused the death of about 200,000 people, and displaced half of the population.
However, considerable progress has been made since peace was reestablished. Due to Bosnia and Herzegovina's strict currency board regime, inflation has remained low in the Federation and Republika Srpska. However, growth has been uneven, with the Federation outpacing the Republika Srpska. Bosnia and Herzegovina's most immediate task remains economic revitalization. In order to do this fully, the environment must be conducive to a private sector, market-led economy. Bosnia and Herzegovina faces a dual challenge: not only must the nation recover from the war, but it also must make the transition from socialism to capitalism.
Support for Eastern European Democracy (SEED) and other foreign assistance accounts for 20%-25% of economic growth in Bosnia and Herzegovina. Movement has been slow, but progress has been made in economic reform. A Central Bank was established in late 1997, successful debt negotiations were held with the London Club in December 1997 and with the Paris Club in October 1998, and a new currency linked to the Deutchmark was introduced in mid-1998, and has remained stable.

Aid and production
The current economic situation of Bosnia Herzegovina is a quite telling indicator of the critical state of affairs of the country.
The general decrease in the national GDP (in the Nineties rates fell 65% overall) has been obviously due to the war events and, in the aftermath of the conflict, to the delays of the political institutions in finding a way out of the crisis. Between 1998 and 2001 the economy has clearly shown that there is room for action and that serious commitment to an effective transition plan can pave the way towards attaining standards in line with a supposed process of European integration. GDP rates have inverted the negative trends and grown an average of 3.6% in US$ and 10.5% in KM (Convertible Marks, the local currency) each year. Moreover, inflation has been restrained to 4.5%.

It has to be pinpointed how these achievements originated from strong injections of international aid rather than wisdom and ability of local policy-makers. A series of international conferences were in fact organised under the auspices of the World Bank and the European Union between 1996 and 1998 for the purpose of fundraising for reconstruction.

Future challenges
With the progressive shift from humanitarian assistance to development cooperation � and with the most recent diminution in financial aid � authorities are becoming aware that recovery will not take place if not accompanied by transition.
In this regard, a series of primary areas of intervention have been identified: facilitation of foreign direct investment, improved balance between State and Entity institutions, realisation of a single economic space in BiH, re-establishment of economic ties with neighbouring countries.
It should be reminded that the Bosnian economical structure fitted into a wider trade-system comprising the whole of the former Fed. Rep. of Yugoslavia. The disintegration of the latter has determined the end of the market to which the production of the local self-managed enterprises was destined.

As in other post-communist countries corruption has not failed to have an impact on the Bosnian economy. The political balance reached in Dayton framed what previously constituted a single economic and political space into three areas of influence roughly corresponding to the main ethnicities in the country. The newly emerged lobbies factually control a large part of both the formal and informal sector in BiH with policies and practices that are far from transparent.
The international community has recently paid a great effort in the attempt of dismantling the current system, particularly in the area of Mostar, Siroki Brieg and more in general in Western Herzegovina.
Tackling corruption has become a prerequisite for a sustainable economic and human development. Failure to stop these practices will in fact prevent an inflow of a vital force in the transition process: foreign direct investment.
For a country like BiH having at the moment very slim chances of inward investment, attraction of foreign capitals � under the form of aid, credits or investment - has become a priority. Though having so far scored very poorly in this regard, BiH has a wide range of potential partners to turn to: Germany, Austria, Slovenia, Croatia, Italy and Yugoslavia.

Further obstacle to the harmonious development of the Bosnian economy is the widespread phenomenon of �grey labour�. The estimated 600,000 persons working in the black market account for a loss to public revenues somewhere around KM 250 million. As it has been noted in a recent UNDP Report, the traditional concept of labour has lost its meaning in BiH with the labour force squeezed between formal employers � providing social and health insurance, but unable to grant sources of income � and real employers � offering underpaid jobs free of rights and social entitlements.

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