Bosnia and Herzegovina: Economic and Political Overview
Nowadays, Bosnia and Herzegovina is considered an upper-middle-income country, achieving great results since 1995, the year in which the inter-ethnic conflict that destroyed much of the Bosnian economy and infrastructure, increased unemployment and decreased production, came to an end. After growing 1.7% in 2023, an improved EU economic landscape, along with higher private consumption and investment driven by construction activities, contributed to a 2.8% increase in real GDP in 2024, with a similar pace expected for 2025. In 2026, stronger external demand and recovery from flood damages are expected to drive higher output growth (World Bank). However, several structural challenges limit output growth. Productivity is hindered by the large presence of state-owned enterprises, which employ much of the educated labour force. Population ageing, driven by outmigration, also reduces productivity and strains public services, particularly healthcare.
The general government maintained a near-balanced fiscal position in 2022 and 2023, benefiting from stronger-than-expected revenue growth, although planned investments were hindered by administrative and political obstacles. In 2024, significant permanent spending increases (e.g., wages and pensions) contributed to a rise in the fiscal deficit, with additional spending pressures from flood repairs expected in 2025, slowing the reduction of the public debt ratio. According to official governmental figures, Bosnia and Herzegovina's foreign debt reached BAM 9.23 billion (USD 4.95 billion) at the end of 2024. The Federation's external debt rose to BAM 5.08 billion by December, while the Serb Republic's foreign debt increased to BAM 4.06 billion from BAM 3.93 billion. Overall, the debt-to-GDP ratio of the Federation was estimated at around 34.5% at the end of 2024, with an upward trajectory expected over the forecast period. Meanwhile, the annual average inflation stood at 1.4% in 2024, down from 5.1% one year earlier and 14.9% in 2022 (National Statistics Office).
Registered employment growth slowed from 1.4% in 2023 to 0.4% year-on-year in the first eight months of 2024, while the LFS unemployment rate remained just above 13%. Trade and tourism saw the largest employment gains, but ongoing outflows of skilled labour are causing shortages in sectors like construction and healthcare. This is likely to lead to wage pressures outpacing productivity growth, negatively affecting competitiveness (EU Commission data). Despite macroeconomic stability and resilience, real income growth in Bosnia and Herzegovina has averaged only 2% per year from 2009 to 2023, resulting in stagnant living standards. The country’s GDP per capita (PPP) is low, estimated at USD 21,498 in 2024 by the IMF, and real per capita consumption remains at just 40% of the EU27 average.
| Main Indicators | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) |
| GDP (billions USD) | 27.06 | 28.40 | 29.86 | 31.50 | 33.05 |
| GDP (Constant Prices, Annual % Change) | 1.7 | 2.5 | 3.0 | 3.0 | 3.0 |
| GDP per Capita (USD) | 7,810 | 8,221 | 8,668 | 9,167 | 9,645 |
| General Government Balance (in % of GDP) | -1.9 | -2.5 | -2.5 | -2.2 | -1.8 |
| General Government Gross Debt (in % of GDP) | 32.2 | 34.5 | 35.7 | 36.7 | 37.5 |
| Inflation Rate (%) | 6.1 | 2.2 | 2.0 | 2.0 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 |
| Current Account (billions USD) | -0.76 | -1.37 | -1.48 | -1.46 | -1.43 |
| Current Account (in % of GDP) | -2.8 | -4.8 | -4.9 | -4.6 | -4.3 |
Source: IMF – World Economic Outlook Database, October 2021
The agricultural sector accounts for 4.7% of the country’s GDP and nearly 17.6% of total employment (World Bank, latest data available). Bosnia and Herzegovina has approximately 2.2 million hectares of agricultural land (43.2% of its total land area - FAO), and most of the farms are small in size and family-owned, so that the country remains a net food importer. The most resource-rich and productive sectors domestically are fruits and vegetables, livestock, and poultry. Corn is the most widely cultivated crop, followed by wheat and potatoes. The country is still a net food importer. According to the latest figures from the National Statistical Office, in 2024, agricultural product prices rose by 44.9% compared to 2020. Crop prices increased by 40.7%, while animal production prices went up by 50.8%. Input I (goods and services used in agriculture) saw a 29.4% rise over the same period.
The industrial sector employs 30.6% of the workforce and constitutes nearly one-fourth of the GDP. Bosnia and Herzegovina mainly produces raw materials such as steel, coal, iron ore, lead, zinc, and aluminium. Additionally, wood is a significant sector and export commodity. Other important production sectors are mineral and chemical products, machinery, mechanical appliances, textiles, and footwear. The overall value-added of the manufacturing sector is estimated at 13% of GDP (World Bank). Bosnia and Herzegovina's industrial output fell by 4.2% in 2024, according to the country's statistical office. The largest annual decline was in the manufacture of leather and related products, which dropped by 22.4%, while the biggest increase of 21.7% was seen in the production of electrical equipment.
Lastly, the service sector contributes 55.8% of GDP and 51.8% of total employment. The most important tertiary sector of the economy is trade, followed by business services, transport, and construction. Tourism has been growing fast in recent years, and although it was impacted by the pandemic, it showed resilience: in 2024, Bosnia and Herzegovina saw nearly 2 million tourist arrivals, a 10.3% increase from the previous year. Overnight stays surpassed 4 million, rising by 8.5% year-on-year. Notably, foreign visitors accounted for 70.5% of total overnight stays. As per the banking sector, it is primarily dominated by commercial banks, with 21 operating alongside 2 investment banks. The country is made up of two entities — the Federation of BiH and the Republic of Srpska — each with its own banking regulator: the Banking Agency of the Federation of BiH and the Banking Agency of the Republic of Srpska.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 17.6 | 30.6 | 51.8 |
| Value Added (in % of GDP) | 4.7 | 23.8 | 55.8 |
| Value Added (Annual % Change) | -1.3 | -0.5 | 4.0 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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