Boston, MA -- (SBWIRE) -- 01/03/2013 -- BMI View: The construction and infrastructure sector in Bosnia and Herzegovina (BiH) rests on shaky ground as the Eurozone crisis continues to deplete enthusiasm from investors. The coalition government adds further risk with unstable alliances and the risk of a much more pronounced downturn in economic activity. Construction industry value is forecast to stand at US$0.7bn in 2012, with average year-on-year (y-o-y) growth of 2.2% expecting to see the industry value rise marginally by 2016, to US$0.8bn.

Key factors contributing to growth include:

- The proposed expansion of a terminal at Sarajevo Airport was postponed owing to a lack of demand from passengers. The airport only handled 600,000 passengers during 2011 while the current terminal building has an annual capacity of 1mn passengers. The European Bank for Reconstruction and Development (EBRD) provided the Bosnia-Herzegovinian government with a EUR25mn (US$30.76mn) loan for the project in 2010.
- Bosnia's Muslim-Croat Federation entered into a construction contract with Turkish construction company Cengiz Insaat. The contract, valued at EUR115mn (US$146mn), is for a section of a future north-south highway. The Suhodol-Tarcin section involves constructing a 3.5km of tunnels and an interchange. The European Bank for Reconstruction and Development is financing the project, with construction due to take 28 months.

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Tensions between ethnic groups in Bosnia will continue to weigh on the country's EU accession prospects, development potential and risk profile through the next decade. Indeed, the risks to the status quo are primarily weighted to the downside, in our view, with a number of issues having the potential to result in a further deterioration in the political situation. That said, we expect the international community to remain firmly committed to Bosnia, which should prevent a relapse into large-scale armed conflict.

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