Trade, Economic and Industrial Growth of the Republic of Srpska

In the era of globalization, the world trade is growing faster than production. Countries are opening up to the global market and they are liberalizing trade. The result is accelerated growth in exports and imports, with exports increasingly becoming a new development paradigm. Many countries adapt their economic structure to the production of goods for export. These are tradable commodities produced mainly by export-oriented industrial sectors. China, South Korea, Germany, and some other countries base their economic growth on so-called export orientation. This choice is possible and desirable for both small and developing countries. The Republic of Srpska (further in text: RS), as an entity in Bosnia and Herzegovina (further in text: BiH), has a small market and is a minor player in international trade. It has no clear long-term economic strategy, and has not implemented all the necessary reforms yet. The economy, and especially the industry, are not structured according to exports, although in the last decade the coverage of imports with exports has been increasing. Exports are increasingly becoming a factor of economic growth, i.e. they contribute to the GDP growth. The growth of trade with the European Union has the biggest impact on the increase in exports. The results of the regression analysis have confirmed the significance and positive impact of exports on the RS GDP. It has shown that the export is extremely important for economic growth, as each unit of the export growth contributes to the GDP growth by 1.27. The impact of export on the share of manufacturing industry in the GDP is significant and positive, whereas the impact of trade on the GDP is not significant