Key developments and challenges

In the short term, the economy will remain weak. GDP is expected to decline by around 3 per cent in 2009, with the likelihood of at best a very modest recovery in 2010. The authorities have very little room for manoeuvre to alleviate the effects of the crisis, especially in the FBH where (unlike in the RS) there are virtually no funds from past privatisation receipts. 

Over the medium term, there is no reason why growth should not improve, aided by the resumption of strong inflows of FDI, provided that the authorities implement reform-oriented policies and that the country remains on the path to EU integration.