April 5 (SeeNews) - Bosnia and Herzegovina's economic growth is expected to gain speed this year and next before reaching 4% in 2021, backed mainly by consumption and to some extent by public investment, the World Bank said on Friday.
Bosnia's economy expanded by an estimated 3.0% last year, with domestic demand remaining the dominant growth driver, the World Bank said in an Economic Update for Europe and Central Asia. Growth is expected to accelerate to 3.4% in 2019 and 3.9% in 2020.
A moderate rise in exports is expected as the reform agenda deepens, but strong demand for imported goods implies that growth will continue to be driven by consumption, the World Bank said, adding that remittances are likely to remain high and stable at 8.3% of GDP
Poverty is projected to slowly decline over the following several years, the World Bank said.
"As poverty is strongly associated with unemployment and inactivity, economic growth and improvements in labor market participation and employment will remain key, especially in sectors that employ the low-skilled."
Bosnia's official unemployment rate fell from 20.5% in 2017 to 18.4% in 2018, driven by a drop in activity rate and a slight rise in employment.
At the moment, much of the unemployed have either secondary education or less, the World Bank said.
"A stronger push on the capital investment program and streamlining of current spending, including better targeting of social assistance programs, remains a high priority for the authorities’ medium-term economic programs."
The challenging political environment remains the main domestic risk, making structural reforms difficult, which raises risks to the economic outlook. Slow growth in the EU and rising interest rates in developed countries are the country's main external risk.