IMPACT OF GLOBAL MOVEMENTS ON ECONOMIC GROWTH AND FISCAL STABILITY IN THE REPUBLIC OF SRPSKA

Abstract

The world economy has been exposed to intense cyclical movements since the beginning of the 21st century. After the global economic crisis of 2008, several years of stabilization and recovery followed. Тhe last few years have seen global disruptions caused by various factors, such as: the migrant crisis, the crisis caused by the COVID-19 pandemic and the current crisis in Ukraine. This resulted in a disruption in the energy market, global inflation, disrupted supply chains and the growth of protectionism in international trade, with a strong impact on economic developments in the Republic of Srpska. Republika Srpska, as a small and open economy at a lower level of development, is highly exposed to movements on the global market, and especially to oscillations of economic activity in countries with which it has intensive economic relations. Exports in Republika Srpska are highly correlated with its economic growth and efficient use of available resources. But Republika Srpska is import dependent in many sectors. Monetary policy is based on the principle of the monetary board, and the economic development of Republika Srpska is directly conditioned by foreign direct investments. These facts are conditioned by the economic trends in the Republic of Srpska. The question is to what extent global disturbances affect economic developments in the Republic of Srpska and how these developments affect its fiscal stability? This paper provides a quantification of the impact of the economic trends of the most important foreign trade partners of Republika Srpska and the countries of the European Union on its economic growth. This analysis quantifies the impact of the economic development of Republika Srpska on fiscal stability. Based on the results of this analysis, the information is obtained as to show how dependent the economy of Republika Srpska is on external influences, and how fiscal stability is conditioned by its economic development.