THE GLOBAL CRISIS AND BOSNIA AND HERZEGOVINA

Abstract

The financial crisis brought about by the break down of the USA mortgage market has affected almost all economies of the world. Its consequences are very severe: they include bankruptcies of major investment banks, great losses by many companies of the financial (banks) and non-financial sectors (automobile and construction industry), reduction of the business activities, lay-offs, consumption cuts, and, in consequence, a drop in the GDP growth rates. It is estimated that the GDP growth rates for EU and USA in 2009 will be negative.

The effects of the global crisis on Bosnia and Herzegovina, as in case of other transition economies, are indirect. There will be fewer opportunities for borrowing, and the debt costs will increase. Foreign investors will exhibit more restraint, and our exports and foreign currency inflow will decrease. The situation will be especially difficult in metal (aluminum and steel) and construction industry.

The crisis will exacerbate the existing poor economic and social state of Bosnia and Herzegovina. Its impact may be softened by employing certain programs of assistance to exports, investments and agriculture. This paper provides some suggestions in that sense. It also offers lessons to be learnt from the current global crisis (as “opportunities”), and reminds of the interpretation of global crisis provided in the Capital by Marx, and the Lexicon of Economics.