7. Impact of COVID-19 in Bosnia and Herzegovina
The COVID-19 pandemic and its economic consequences have had a relatively high impact on Bosnia and Herzegovina’s population and economy. The authorities acted quickly to contain the virus during the first wave of the pandemic. They also mobilised sizeable fiscal resources to mitigate the impact of illness and strict confinement measures on people and firms. This chapter reviews the sources of vulnerability and resilience that determined the impact of the crisis and that will condition the path to recovery. While the economy weathered the pandemic better than originally projected, weaknesses in the labour market and the social protection system left parts of the population unprotected. Fiscal room for manoeuvre was pivotal in allowing Bosnia and Herzegovina to respond. The crisis has also put the spotlight on structural sources of vulnerability that should receive attention as the country prepares its development strategy for the future.
Bosnia and Herzegovina has experienced several waves of the pandemic. The first case of COVID-19 was reported on 5 March 2020 and the first death on 21 March. By 1 May, there were 1 757 cases (614 cases per million inhabitants) and 68 registered deaths (21 per million inhabitants), compared to 9 registered deaths per million in Albania and 13 per million in both Kosovo and Montenegro. By 24 May 2021, there were 61 994 cases per million inhabitants (Figure 7.1) and 2 789 registered deaths per million inhabitants, which is the highest number in the region (Figure 7.2). On the same date, the economy counted a total number of 203 513 cases and 9 168 registered deaths (Statista, 2021[1]).
Source: Authors' calculation based on Our World in Data (2020[2]), Our World in Data website, https://ourworldindata.org/.
Note: Bosnia and Herzegovina reported its first registered COVID-19 case on 5 March 2020 and its first registered COVID-19 death on 21 March 2020.
Source: Authors' calculation based on Our World in Data (2020[2]), Our World in Data website, https://ourworldindata.org/.
Authorities in Bosnia and Herzegovina acted quickly to contain the spread of the virus, yet future health resilience is not guaranteed. A state of emergency was declared in late March. A lockdown was implemented, and citizen movements were restricted. The borders, public areas, parks and shopping malls were closed; grocery stores and pharmacies remained open. The restrictive measures were effective and led to reduced movements throughout Bosnia and Herzegovina with respect to February (Figure 7.3 – Panel A). While the state of emergency was lifted on 21 May in Republika Srpska and 29 May in the Federation of Bosnia and Herzegovina, the subsequent rising case numbers led to new restrictions. Despite rather effective social distancing measures, Bosnia and Herzegovina has been conducting only 295 030 tests per million inhabitants since the beginning of the pandemic – a relatively low number by regional comparison. Low testing levels raise the risk of an increase in contagion. Increasing testing capacity will be crucial in detecting new cases and strengthening the economy’s health resilience (Figure 7.3– Panel B). With 1 people fully vaccinated per hundred inhabitants by the latest available data, vaccine capacity in Bosnia and Herzegovina is the lowest in the region (Figure 7.4).
Note: Panel A shows the relative volume of requests for direction compared to a baseline volume on 15 February 2020, as recorded by Google Maps. Moreover, it shows, in chronological order, the first registered COVID 19 case reported in Bosnia and Herzegovina (5 March 2020), the date of implementation of the curfew (17 March) and the first stage of relaxation of the curfew (21 May in Republika Srpska and 29 May in the Federation of Bosnia and Herzegovina). Costa Rica officially became an OECD Member on 25 May 2021, therefore it is not included in the OECD averages in the current report.
Source: Authors’ elaboration based on Panel A. Google (2020[3]), “Google Mobility Trends”, www.google.com/covid19/mobility/; Panel B. Worldometer (2020[4]), “Coronavirus”, www.worldometers.info/coronavirus/.
Note: Last reported numbers are from May 2021.
Source: Worldometer (2020[4]), “Coronavirus”, www.worldometers.info/coronavirus/.
Authorities in Bosnia and Herzegovina have taken a series of measures to mitigate the negative impact of the crisis on the economy (Table 7.1). To support affected citizens, the authorities introduced coverage of wage and social security contributions in certain sectors, accommodation vouchers, price controls and other measures. Several measures were introduced for private enterprise, including reduction of rent, easing of loan repayment and preferential treatment of domestic companies in public procurement. Based on the recent available data, the entity governments have allocated BAM 50 million (Bosnia and Herzegovina convertible mark) (0.15% of GDP) to support their health sectors.1 Bosnia and Herzegovina also received assistance from the International Monetary Fund (IMF) and the European Union.
The severe lockdown that lasted until June 2020 and which was subsequently partially reinstated due to growing case numbers affected economic activity. Despite the GDP growth of 2.7% in 2019 (IMF, 2020[9]), Bosnia and Herzegovina experienced severe contraction in 2020 (-4.3%), driven by reduced cosumption and investment. The services sector was hit hardest by the pandemic, contracting by about -3.1 percentage points. While exports were effected due to reduced external demand, simoultaneous contraction in merchanise imports, improved Bosnia and Herzegovina’s overall trade balance (World Bank, 2021[10]).
Bosnia and Herzegovina is relatively vulnerable to COVID-19 along a series of economic and social dimensions, while institutional weaknesses undermine the resilience of its policy response (Table 7.2). Considering pre-existing vulnerabilities can help policy makers to determine who will need help the most and to design and target policies accordingly. High unemployment and widespread informality already weaken Bosnia and Herzegovina’s economy and can slow down recovery. Moreover, they imply that a significant share of the population risks remaining without adequate health and social assistance. Exposure to foreign investors and trade may be another source of vulnerability, given how severely the virus hit Bosnia and Herzegovina’s main trade partners. The relative stability of the financial sector may become an asset for post-COVID-19 recovery. Low government effectiveness and the politicisation of the civil service may weaken the implementation capacity of the state.
Material well-being
People’s material well-being is likely to worsen with the COVID-19 crisis. The poverty headcount ratio (measured as USD 5.50 per person per day, 2011 PPP) was about 4% in 2017, compared to 3.6% in OECD economies. Its incidence varies greatly across the economy and is particularly high in the western parts of Bosnia and Herzegovina (including in some of regions of Republika Srpska and cantons of the Federation of Bosnia and Herzegovina), where opportunities are lacking (Šabanović, 2016[20]).
Labour markets are not solid enough to minimise the effects of the pandemic. Already weak labour market conditions may worsen as the impact of COVID-19 on the economy heightens, thus fuelling future unemployment. At 37.8%, Bosnia and Herzegovina’s employment rate is rather low – about 20 percentage points below the OECD average (57.7% in 2019). In line with the low employment rate, the unemployment rate was 15.7% in 2019, about 10 percentage points above the OECD average (5.8% in 2019). The authorities have announced various measures to retain employment, including wage subsidies (Table 7.1). Widespread informality, which accounted for 23.1% of total employment in 2018, may have a significant impact on those that have no access to access to social safety nets.
A drop in personal remittances from Bosnia and Herzegovina’s diaspora could lead to income losses for some households. About 2 million citizens from Bosnia and Herzegovina live abroad (Halilovich et al., 2018[21]), and their remittances accounted for about 11.2% of GDP in 2019, compared to 0.9% of GDP in OECD economies in 2018. Potential further drop in remittances, as migrant workers tend to be more vulnerable to loss of employment and wages in the host economy, could erode the income of a significant share of households and lead to a further decrease in consumption (World Bank, 2020[22]).
Health and non-material well-being
Pre-existing risk factors related to the population’s health profile and the functioning of the health system affect the country’s capacity to deal with COVID-19. Bosnia and Herzegovina’s overall key health outcomes are good for its income level, although significantly worse for minority populations. An ageing population and unhealthy lifestyles translate into a growing burden of non-communicable diseases (NCDs), which does not bode well in light of the current crisis. Cardiovascular diseases and lung and colorectal cancers are the leading causes of premature death, and deaths from diabetes grew by over 20% in 2007-17. Level of exposure to harmful outdoor air pollution is among the highest in Europe. Incidence of smoking is also very high (see the People section in Chapter 8) (World Bank, 2020[23]). Spending on health care accounts for 8.9% of GDP – higher than the Western Balkan average (7.5%) but lower than the OECD average (12.5%). The number of physicians and hospital beds relative to the population is in line with the OECD average, but the outlook is grim. The recent migration to Europe of qualified medical staff attracted by higher salaries will undermine Bosnia and Herzegovina’s health response to the crisis.
Other, non-material aspects of well-being are affected by the crisis. Living conditions at home, where most people were asked to stay, are less than ideal for some: 37.1% of households in Bosnia and Herzegovina lack high-speed Internet, making teleworking and home-schooling difficult. Quality of life is also about people’s relationships, which can provide a vital lifeline during crises and social distancing. Yet, one in ten citizens of Bosnia and Herzegovina say that they have no relatives or friends they can count on for help in times of need. Even before the COVID-19 pandemic, life satisfaction was lower than in the average OECD economy. The considerable risks of social isolation and loneliness need to be addressed by policy measures for both physical and mental health, for instance regular check-ins by social services, civil society and volunteers, and promotion of digital technologies that connect people with each other and with public services (OECD, 2020[24]).
Women are particularly exposed to the collateral effects of COVID-19. As in other economies in the region, loss of employment and lockdown conditions in Bosnia and Herzegovina are likely to have led to increased gender-based violence (Bami, 2020[25]; OECD, 2020[26]). Domestic abuse existed before the crisis: according to a 2013 survey of 3 300 families conducted by the Gender Equality Agency, one in two women had experienced some form of gender-based violence during her adult life (USAID, 2020[27]). Women are affected in other ways too. They make up the majority of the healthcare workforce, exposing them to greater risk of infection. At the same time, women are shouldering much of the burden at home, given school closures and longstanding gender inequalities in unpaid work (see the People section in Chapter 8).
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Note
← 1. Bosnia and Herzegovina has three separate health systems: Republika Srpska, the Federation of Bosnia and Herzegovina and Brčko district.