Sarajevo is the capital of Bosnia and Herzegovina, and is also the largest economic and cultural centre of a country still deeply divided in two entities. Culturally rich, the city lags in terms of wealth behind its peers in the former Yugoslavia and Eastern Europe, mostly due to the 1992-1995 war, a brain drain and its weak production base. Sarajevo generated 15% of Bosnia and Herzegovina's GDP in 2016. Thanks to higher labour force participation, it produced 38% higher per capita GDP than the
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Labour productivity in Sarajevo is among the lowest in Eastern Europe. In 2016, it was 25% lower than in Skopje (which is the least productive of the other former Yugoslav major cities) and 5.9% lower than in other parts of Bosnia and Herzegovina. The low educational profile and bureaucratic barriers in Sarajevo have prevented the development of high value-added industries, such as business services or export-generating manufacturing industries. The exports-to-GDP ratio was only 12% in 2016 in Sarajevo, compared to 52% in Skopje.
Sarajevo suffers from high unemployment and low labour force participation rates. The situation is, however, even worse in other parts of Bosnia and Herzegovina: the labour force participation rate was only 62% of the 15-64-year, working-age, population in Sarajevo in 2016, well above the 44% rate elsewhere in Bosnia and Herzegovina. This lifted the city's average household disposable income 15% above that elsewhere in Bosnia and Herzegovina, and close to the figure in Skopje (only 1.5% below), in 2016.
Having higher disposable incomes than those in other parts of Bosnia and Herzegovina, households in Sarajevo spent, in 2016, 11% more on goods and services (excluding transport and housing). However, incomes are low in absolute terms, resulting in a high share of consumer expenditure being dedicated to food: 31% of total expenditure in 2016, the second greatest share in Eastern Europe after Minsk (34%).
Consumer expenditure on transport and housing per household accounted for 26% of the total budget in Sarajevo, as well as elsewhere in Bosnia and Herzegovina in 2016, while in absolute value, it had among the lowest cost of living in Eastern Europe (33% lower than in Skopje).