GDP of Bosnia and Herzegovina in 2017

GDP = C + G + I + NX.

GDP millions of KM in 2017 = 32.299

GDP per capita millions of KM in 2017 = 8.941

GDP millions of $ = 18,168,579.58

Nominal GDP an increase of 4.08% compared to 2016

Real GDP an increase of 3.37%

a) Consumer spending = 75% of GDP = 24.347 milions of KM

nominalni growth 2,93%.
Real growth 1,25%

Restaurants and hotels 10,27%

Transport 5,65%, and so on.

b) Government spending = 20% of GDP = 6.369 milions of KM

Nominal growth 1,60%
Real growth 1,55%

c) Country's investment = 18% of GDP = 5.653 milions of KM

Nominal growth 8,95%
Real growth 5,75%.

d) Net export

Export = nominal growth 14,65%

Real growth 10,14%.

Import = nominal growth 11,73%

Real growth 6,32%
Expenditure approach to measure GDP of B&H in 2017
 Income approach to measure GDP of B&H in 2017

Labor income in 2017 = 14.609.434/31.332.395*100 = 46,63%

Production approach to measure GDP of B&H in 2016 and 2017 (first results)
1. Did B&H experience period of deflation during this period?

Deflation is overall decrease in price level. It is a result of an economic inequality when supply is
higher than demand. In order to move to equilibrium (supply=demand), price level needs to
decrease. In last 15 years, Bosnia and Herzegovina has experienced deflation many times. For
example, price level in 2002 was 4.462 and in 2003 it was 0.912. The strongest deflation
happened in period of the Global Financial Crisis from 2008 to 2009. As we can see from the
graph in Excel document, in 2008 price level was 7.21 and next year price level was 0.17. From
this period, B&H experienced deflation again. In 2013, we can say that price level was the lowest
one with value of -0.224. Since 2013, there is small but constant increase in price level which is
called inflation. In 2017, the price level was 2.346.

There are many consequences of deflation and some of them are: increase in debt which drags
on consumer confidence, increase in borrowing cost, decrease in profit margins, redistribution
of income (it flows from debtors to creditors), postponement in spending (consumers expect a
much more decrease in prices in future so they postpone their purchasing).

2. Did B&H experience recession(s) during this period?

Recession is characterized as a slowdown in economic activity. Some of the indicators that tell us
whether certain country is in period of recession are: GDP, inflation rates, investment, income,
and so on. To be more specific, a country is in recession when it has decline in GDP growth 6 or
more months.

Based on data about the real GDP growth of Bosnia and Herzegovina in last 15 years, we can see
that our country has experienced significant decline in its economic activity since 2008. In 2008
real GDP was 5.583, and in 2009 it was -2.99. This decline was a result of big economic crisis that
had a negative effect on the whole economy. Unfortunately, Bosnia and Herzegovina still did not
recover from this recession. There are many negative consequences such as constant increase in
unemployment rate (more than 60 000 people lost their job), lower foreign investment, slower
GDP growth, inflation, lower consumption, lower production, and so on. Based on all graphs in
Excel document, we can conclude that B&H from year to year is trying to improve its economy
but in one year we have an improvement, but next year we have downturn. Because of this
situation, many people were motivated to left B&H and move to other countries such as
Germany, Slovenia, Austria in order to work and provide good life for their children.

Although B&H did not recover from the economic crisis, some countries did. In order to protect
its members, the European Union was adopted a new strategy in 2010. The aim of this strategy
was to provide a help for all countries that are members of the EU to emerge stronger from the
economic crisis by increasing employment, encouraging GDP growth, providing incentives to
increase productivity, and so on. As we know, B&H is not a member of the EU and because of
that, an adoption of this EU strategy will not help our country to solve all the problems that the
crisis brought.
Now on, we can just wait for EU response to see whether it will accept our candidacy or not.
While we are waiting, I think there are still many things that are government can do in order to
improve current situation.

3. How do interest rates in B&H compare with interest rates in EU countries?

In order to answer this question, I found the interest rates of four EU countries: Germany,
Slovenia, France, and Croatia in period of 2002 to 2016. As we can see on the graph in Excel,
interest rate of B&H does not follow the fluctuations of this rate in other countries. In 2002,
Croatia and Germany had higher interest rate, in 2003, B&H had double value of interest rate in
comparison with Germany, France, and Slovenia. In this year, Croatia had similar interest rate. In
2006, B&H experienced significant decline of interest rate (from 6.6 in 2005 to 0.169 in 2006).
Mentioned EU countries did not have this situation. In the following three years, the interest rate
was constantly decreasing. After the global economic crisis, the interest rates of B&H increased
rapidly. In 2008 the rate was -0.216 and in 2009 it was 7.49. This sudden increase did not happen
in other countries. Germany even managed to reduce its value rate, while France and Slovenia
had small increase. Croatia in this period was not a member of the EU and because of that, the
country had similar situation as Bosnia. In 2008, the interest rate of Croatia was 4.13 and in 2009
the rate reached value of 8.54. Since 2013, the interest rate of B&H slowly decreases while in
other mentioned countries there are some inclines.

4. How did unemployment rate behave in relationship to inflation rates and real GDP growth
rate? Is there a positive or negative relationship between these variables?

There are two possible relationship between variables, positive and negative. A positive
relationship is when one variable increases and the other variable increases as well or as one
variable decreases the other variable will decrease as well. A negative relationship is when one
variable increases and other one decreases. Based on graph in Excel, we can conclude that there
are different relationships between unemployment rate, real GDP growth rate, and inflation rate
of B&H in period of 2002 to 2017. In most of the cases, unemployment rate and real GDP growth
rate have negative relationship which is logical, as real GDP growth rate increases (consumption
increased, production increased, more available jobs), unemployment rate decreases. This
relationship is desirable. Also, there are years when real GDP growth rate decreased, then
unemployment rate increased. When it comes to the inflation rate and unemployment rate,
these variables mainly have negative relationship, but in some years, there is a positive
relationship which is not quite often. The relationship between inflation rate and real GDP growth
rate is positive, as we have increase in production and overall GDP, prices will also increase. The
best situation in economy is when unemployment rate is low and real GDP growth rate is high
because in that situation, people will have high purchasing power (every time inflation occurs,
wages increases as well), they will also have different choices (firms will be more productive, they
will have more ideas, capabilities, and so on). As a result, firms will profit more and everyone will
be better off.