SARAJEVO (Bosnia and Herzegovina), November 30 (SeeNews) – Although living standards in Bosnia and Herzegovina have increased six-fold from 1995 to 2015, they still remain among the lowest in Europe, the World Bank said in a new report on Thursday.
Two percent of the population in Bosnia and Herzegovina live right above the national poverty line, the World Bank said in its report Western Balkans: Revving Up the Engines of Growth and Prosperity report.
The report looks at how Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia - the six countries of the Western Balkans - can speed up economic growth and achieve faster income convergence with the EU.
In post-crisis Bosnia and Herzegovina, the average decline in consumption explained the overall increase in poverty, with the change in welfare distribution slightly counteracting this increase, the World Bank said.
Bosnia and Herzegovina has also the second-lowest labour force participation among the countries of the Western Balkans, according to the report. Furthermore, the employment rate among its bottom two consumption quintiles, at 40%, is even worse than the 50% employment rate among the top 60. The unemployment rate is 44% among the country’s Roma population, compared to 27% among non-Roma neighbours living in the same community.
Bosnia and Herzegovina also has the highest median age in the Western Balkans, and expects to see it increase from 41.5 in 2015 to 53.9 in 2065—the second highest in the world.
"If there are no policy or behavioral responses or changes in labor productivity, simulations show that aging in the region will lower labor force participation and reduce average annual per-capita income growth by 0.4 percentage points over the next 50 years."
Bosnia and Herzegovina's other main issue is the fact that 60% of the population is still rural, making it among the least urbanized country in Europe.
"The cost of living in cities is high while access to public services in rural areas is at reasonable levels. Migration, especially after the wars, tended to be cross-border rather than toward the cities," the World bank explained.
In terms of trade, Bosnia's exports of goods and services have been growing at only 5% a year in the last decade and a half, which is the lowest median growth in the region.
The World Bank advised that in order for Bosnia, and the other Western Balkan states to revive growth, appropriate changes in policies and public investments to expedite trade integration through exports will be critical.
When it comes to enhancing the success of private business to foster growth, Bosnia and Herzegovina must overcome many obstacles to create an environment in which private firms can be born and flourish as the private sector’s share of GDP is at the Western Balkans’ lowest levels of 60%.
"Low share of private enterprises in investment, employment, and GDP generally works against long-term growth of the economy as a whole," the World Bank said.
Also weighing on Bosnia's private sector are taxes on goods and services which make up 44% of total revenue, as well as social security contribution rates which are on the order of 35-40% of gross wages, the highest in the region.
Bosnia has also been the slowest to privatize large state-owned enterprises, the World Bank noted, and urged the countr to step up action in this direction.
In October, the World Bank cut its projection for Bosnia’s 2017 economic growth to 3.0% from previously predicted 3.2%. The country's GDP growth is, however, expected to pick up to 3.2% next year.