Bosnia and Herzegovina – Country partnership strategy progress report for the period FYO8 – FY11

This Country Partnership Strategy Progress Report (CPSPR) assesses progress in implementing the FY08-FY11 Country Partnership Strategy (CPS) for Bosnia and Herzegovina (BH).

The CPSPR confirms the overall direction of the World Bank Group program while introducing adjustments for the remainder of the CPS period that reflect the country's unique governance structure and challenges from the external economic environment.

As expected in a small open economy, the global economic crisis spread quickly in BH over recent months, reversing some of the effects of strong growth and putting at risk macroeconomic stability and important economic reforms. Though there was no serious crisis in the financial sector, the real sector and private consumption slowed substantially since the end of October 2008. These two factors and lower commodity prices have taken a toll on indirect taxes (the main source of public revenue), which dropped 5 percent in January 2009 and 17 percent in February compared to the same months in 2008. During the first two months of 2009, year-on-year exports and imports also dropped 22 percent and 23 percent, respectively. External financing requirements are moderating, as the Current Account Deficit (CAD) is expected to fall by around 4 percentage points to about 10 percent in 2009.

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