Bosnia faces the dual problem of rebuilding a war-torn
country and introducing market reforms to its formerly centrally planned
economy. One legacy of the previous era is a greatly overstaffed military
industry; under former leader Josip Broz Tito, military industries were
promoted in the republic, resulting in the development of a large share
of Yugoslavia's defense plants but fewer commercially viable firms.
For the most of Bosnia's history, agriculture has been
based on small and inefficient privately owned farms; food has traditionally
been a net import for the republic.
The war in the 1990s caused a dramatic change in the
Bosnian economy. GDP fell 75% and the destruction of physical infrastructure
devastated the economy. While much of the production capacity has been
restored, the Bosnian economy still faces considerable difficulties.
Figures show GDP and per capita income increased 10% from 2003 to 2004;
this and Bosnia's shrinking national debt being positive trends, but
high unemployment and a large trade deficit remain cause for concern.
The national currency is the (Euro-pegged) Convertible
Mark (KM), controlled by the currency board. Annual inflation is the
lowest relative to other countries in the region at 1.9% in 2004. The
international debt was $3.1 billion (2005 est) – the smallest
amount of debt owed of all the former Yugoslav republics. Real GDP growth
rate was 5% for 2004 according to the Bosnian Central Bank of BiH and
Statistical Office of Bosnia and Herzegovina.
Bosnia and Herzegovina has one of the highest income
equality rankings in the world, ranking eighth out of 193 nations.
to Eurostat data, Bosnia and Herzegovina's PPS GDP per capita stood
at 30 per cent of the EU average in 2008.