SARAJEVO (Bosnia and Herzegovina), May 10 (SeeNews) – The World Bank said it has confirmed its forecast for Bosnia and Herzegovina's economic growth at 3.2% in 2018, driven by structural reforms, heavy infrastructure investment and strong consumption.
Supported primarily by consumption and to some extent by public investment, economic growth is projected to strengthen to about 4% by 2020, the World Bank said in a Macro Poverty Outlook for Europe and Central Asia.
As Bosnia's reform agenda advances, a moderate rise in exports is expected, but strong demand for imports implies that net external demand will continue to be a drag on growth, the lender cautioned.
"Investments in energy, construction, and tourism will support investment growth generally, as well as job creation in those sectors", the World Bank noted.
It projects that growth will accelerate to 3.4% next year, before hitting 4% a year later.
The international lender explained that as poverty is strongly associated with unemployment and inactivity in Bosnia and Herzegovina, for economic growth to translate into poverty reduction,u improvements in labor market participation and employment will remain key.
The World Bank noted that over the coming period Bosnia will need to focus on achieving prudent, efficient, and effective fiscal policy, addressing persistent unemployment and continuing to safeguard the banking sector.
The main domestic risk to growth, the lender said, is the challenging political environment, which makes structural reforms difficult in such areas as infrastructure, telecommunications, energy sector, and transport.
It also warned that as the country enters general elections year, political turmoil may be a risk for economic growth.
The World Bank expects Bosnia's inflation to speed up to 1.4% this year, from 1.2% in 2017, where it will remain over the next two years.