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Bosnia and Herzegovina's Economic Prospects and Historical Background

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  • Laura Kromjak

    (Tomori Pal College)

Abstract

The essay discusses the socio-political challenges for the economy of Bosnia and Herzegovina and its foreign trade in goods and services, including the Hungarian relation. The study uses descriptive tools and secondary data. Wedged in between Croatia and Serbia, Bosnia and Herzegovina's economy is inextricably linked to the dramatic events of the past and the still unresolved social and political conflicts. Within Yugoslavia, Bosnia and Herzegovina was a member state with significant export potential, but the war and ethnicisation have devastated the economy. The state administration of the Dayton system is expensive, and the foundations for capital flows, privatisation and European convergence are developing slowly. Capital flows, the Instrument for Pre-accession Assistance (IPA) and international aid play an important role in balancing the foreign exchange balance. A significant item reducing the negative current account balance is the amount of remittances, which is six times higher than FDI. Remittances have become the largest source of external financing, increasing dependency and exacerbating the vulnerability of the economy.

Suggested Citation

  • Laura Kromjak, 2021. "Bosnia and Herzegovina's Economic Prospects and Historical Background," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 20(2), pages 148-169.
    • Handle: RePEc:mnb:finrev:v:20:y:2021:i:2:p:148-169
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    References listed on IDEAS

    as
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    2. Xavier Richet, 2019. "Geographical and Strategic Factors in Chinese Foreign Direct Investment in Europe," Asian Economic Papers, MIT Press, vol. 18(2), pages 102-119, Summer.
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    More about this item

    Keywords

    Bosnia and Herzegovina; trade balance; foreign exchange remittance; direct capital investment; EU integration process;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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