Cigarettes in Bosnia and Herzegovina

2020 IMPACT

Excise tax increases yet again in 2020, resulting in further current value decline

Prior to the COVID-19 pandemic, excise tax was increased on cigarettes which affected the prices and therefore led to a decline in demand. Whilst this was the intention from the government, rather than stopping people smoking completely, this simply led to a further increase in illicit trade, which has been growing rapidly over the last couple of years since Bosnia-Herzegovina started adapting to the European Union and Tobacco Products Directive.

Illicit trade reduced due to border closures and lockdown restrictions

Although cigarettes will witness current value decline in response to the COVID-19 pandemic in 2020 overall, one benefit has arisen from the complex situation. Due to lockdown restrictions and border closures, illicit trade has been severely reduced throughout 2020.

Phillip Morris doo dominates value shares in 2020

Global cigarette giant, Philip Morris doo, will continue to lead in 2020, with no close contenders. However, there is a new contender in third place, FDS doo, which was created after a couple of years of takeover of Fabrika Duhana Sarajevo dd and serves to solely look after the tobacco part of the company.

RECOVERY AND OPPORTUNITIES

Further excise tax increases continue to detriment cigarettes in 2021 and beyond

Cigarettes will continue to witness current value decline over the forecast period, however at a slower rate than that seen in 2020. The main reason for this will be due to the COVID-19 pandemic coming to an end and consumers returning to pre pandemic purchasing patterns.

Illicit trade will continue to pose a threat over the forecast period

Over the forecast period, the main threats to cigarettes come from increasing excise taxes and declining incomes, which mean smokers are more inclined to purchase cigarettes more cheaply through illicit trade channels. Therefore, the main recovery opportunities are controlled by the government in Bosnia-Herzegovina, as only lowering or stabilising excise taxes will make cigarettes more affordable for consumers in the country and therefore tempt them back into purchasing through official channels.

Reduced disposable incomes also contribute to current value decline

One of the main consequences of the COVID-19 pandemic over the forecast period will be the ongoing economic difficulties, resulting in reduced disposable incomes. In 2020, GDP has declined by more than 5% which will affect the job market in 2021 and beyond.