Our core view remains that growth in Bosnia & Herzegovina will ac- celerate in the coming years due to growing consumer confidence and export demand for manufactured goods. Internal structural problems and increased global headwinds pose a threat to the country s growth outlook. ...This is due to increased external headwinds, particularly the anticipated im- pact on exports of the EU s decision to lift trade preferences for Bosnia s agricultural exports at the start of the year. With more than three-quarters of all exports heading to the EU and food the country s fifth most important export good, the introduction of tariffs is likely to dent foreign sales in the coming quarters, especially if a new agreement is not reached by the summer harvest season. Looking ahead, we forecast average annual growth of -.- over the --------- period. ...Political risks and a lack of coordination between different levels of government will also remain a deter- rent to investment, as well as impeding the effective distribution of funds that are received.
...Domestic demand will continue to drive real GDP growth in Bosnia & Herzegovina, particularly household consumption, which accounts for around -- of GDP. Over the coming --- year forecast period, we expect fixed investment to play a more significant role in driving GDP, while government spending is shackled by fiscal concerns. ...Even so, we expect government consumption to account for around ----- of GDP over the forecast period, with average annual growth hovering around - . However, the country s complex political system and layers of govern- ments means that expenditure is likely to remain inefficient and concentrated on recurrent expenditure rather than capital investments. This will reduce the beneficial impact of any fiscal stimulus on economic growth. ...This will reduce the beneficial impact of any fiscal stimulus on economic growth.
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