BOSNIA AND HERZEGOVINA ANNUAL PROGRESS REPORT ON IMPLEMENTATION OF MID-TERM DEVELOPMENT STRATEGY (PRSP) Presentation by Mr. Zlatko Hurtic Adviser of Chairman of B&H Council of Ministers Thessalonica, May 27-28, 2005

PROCESS • Mid-term Development Strategy approved in March 2004 by governments and parliaments Supported by Civil Society 2

GENERAL GOALS to create conditions for sustainable and balanced economic development to speed up EU integration 3

SPECIFIC TARGETS to lower unemployment to decerease level of poverty 4

MAIN PRIORITIES to decerease public expenditure level in GDP to increase private sector share in GDP 5

IMPLEMENTATION MECHANISM Economic Policy Planning and Monitoring Unit (EPPU) has been established to: monitor implementation of measures from Action Plan monitor indicators (MDGs) continue with economic research prepare six-month and annual reports on implementation of B&H MTDS 6

PROGRESS REPORT

STATUS OF IMPLEMENTATION for period August 2003 – April 2005 8 Source: Report on implementation of Action plan of MTDS 2004-2007 for period August 2003-March 2005

IMPLEMENTATION BY GOVERNMENTS 9 Source: Report on implementation of Action plan of MTDS 2004-2007 for period August 2003-March 2005

IMPLEMENTATION BY PARLIAMENTS 10 Source: Report on implementation of Action plan of MTDS 2004-2007 for period August 2003-March 2005

IMPLEMENTATION OF MACROECONOMIC FRAMEWORK AND PRIVATE SECTOR GROWTH MEASURES 11 Source: Report on implementation of Action plan of MTDS 2004-2007 for period August 2003-March 2005

PERCENTAGE OF SUCCESS IN IMPLEMENTATION OF MEASURES IN AREA OF SECTORAL PRIORITIES 12 Source: Report on implementation of Action plan of MTDS 2004-2007 for period August 2003-March 2005

ECONOMIC TRENDS

ECONOMIC GROWTH OF B&H IN COMPARISON TO THE REGION IN 2004 * Serbia and Montenegro Source: IMF World Economic and Financial Surveys, World Economic Outlook, April 2005 14

REGIONAL CPI COMPARISON Source: IMF World Economic and Financial Surveys, World Economic Outlook, April 2005, IMF Staff Report, Article IV Discussion Paper 15

FISCAL DEFICIT 16 Source: Medium Term Development Strategy IMF Staff Report, Article IV Discussion Paper 16

WAGE BILL CUT Source: Ministry of Finance and Treasury of BIH, FBiH and RS Ministries of Finance, IMF Staff Report, Article IV Discussion Paper, FBiH and RS Medium Term Expenditure Framework, 2005-2007 17

DEFENSE EXPENDITURES CUT Source: FBiH and RS Medium Term Expenditure Framework, 2005-2007 18

CURRENT ACCOUNT DEFICIT 19 Source: IMF Staff Report, Article IV Discussion Paper

INTEREST RATES DECLINE 20 Source: Central Bank of Bosnia and Herzegovina

BANKS DEPOSIT GROWTH 21 Source: Central Bank of Bosnia and Herzegovina

CORPORATE / HOUSEHOLD LENDING 22 Source: Central Bank of Bosnia and Herzegovina

FOREIGN DIRECT INVESTMENT GROWTH 23 Source: Central Bank of Bosnia and Herzegovina

USAGE OF RAILWAY TRANSPORT IN BIH 24 Source: Statistical office FBiH, Statistical office RS

EXPORT / IMPORT RATE OF GROWTH 25 Source: Central Bank of Bosnia and Herzegovina

INDUSTRIAL PRODUCTION GROWTH 26 Source: Central Bank of Bosnia and Herzegovina, FBiH and RS Institute of Statistics

EMPLOYED AND UNEMPLOYED (including grey economy) in % 27 Source: Living in BiH, Wave 4

WAGES 28 Source: BiH Statistics Agency, FBiH and RS Institute of Statistics

PENSIONS 29 Source: Central Bank of Bosnia and Herzegovina, FBiH and RS Institute of Statistics

POVERTY DECLINES 30 Source: BiH Statistics Agency, FBiH and RS Institute of Statistics, EPPU

Job loss: 20,700 Job creation: 19,900 Out of poverty: 69,000 31

FOREIGN AID SHARE IN GDP 32 Source: IMF Staff Report for 2005, Article IV Discussion Paper

PRIORITIES FOR 2005 • VAT introduction • Corporate restructuring 33