Bosnia and Herzegovina Country Report - April, 2015

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Bosnia and Herzegovina Country Report - April, 2015

This report covers the main macroeconomic releases from April 6 until May 5, 2014 as well as the financial and political events that took place in Bosnia during this period.
In April, the IMF revised down its economic growth forecast for Bosnia to 2.3% from previously projected 3.5%. The growth is expected to strengthen to 3.1% next year and to 4% in 2020. The IMF’s outlook for this year is slightly more pessimistic than that of the country’s central bank which revised its forecast up to 2.6% from 2.5%.
The report provides details about Bosnia’s recently approved 2015 budget draft that includes the spending of the state-level institutions and the servicing of the country's foreign debt.
It also contains information about the Council of the European Union’s decision to conclude the Stabilisation and Association Agreement (SAA) with Bosnia which is expected to enter into force on June 1. The move will officially unblock the country’s path towards the country’s preparation for EU accession.
The report offers details about the main business environment obstacles identified by Bosnian companies, according to a survey carried out by the EBRD and the World Bank.


Key points:
• Deflation eased to 0.2% y/y in March from 0.7% y/y in February.
• Bosnia’s industrial output rose by 0.4% y/y in March, reversing a 1.1% y/y decline in February, thanks to improved performance in all sectors.
• Bosnia’s registered unemployment rate remained unchanged at 43.8% for the second month in a row in February.

Table of Contents

EXECUTIVE SUMMARY 5
REAL SECTOR 6
1. GDP 6
IMF cuts Bosnia’s 2015 GDP growth forecast to 2.3% 6
Bosnia’s c-bank revises 2015 GDP growth forecast to 2.6% 6
2.Inflation 7
Bosnia’s CPI deflation softens to 0.2% y/y in March 7
Bosnia’s Federation CPI inches up 0.3% y/y in March 8
Bosnia’s Serb Republic CPI deflation softens to 0.8% y/y in March 9
Bosnia’s Federation industrial PPI edges down 0.5% y/y in March 9
2. Industry and Trade 9
Bosnia’s industrial production turns to 0.4% y/y growth in March 9
Bosnia's Federation industrial production declines 1.5% y/y in March 10
Bosnia’s Serb Republic industrial production rises 3.7% y/y in March 10
Bosnia’s retail sales growth slows to 6% y/y in March 10
Bosnia’s Federation retail sales growth slows to 3.9% y/y in March 11
4. Tourism 11
Foreign tourist arrivals to Bosnia rise 37% y/y in February 11
Bosnia’s Federation tourist arrivals rise 25% y/y in March 11
Bosnia’s Serb Republic tourist arrivals rise 19.6% y/y in Q1 12
5. Labour Market 12
Bosnia’s registered unemployment rate stays at 43.8% in February 12
Bosnia’s number of unemployed falls 1.2% y/y in February – stats office 12
Bosnia’s Federation number of employed up 1.1% y/y in February 12
Bosnia’s average net wage falls 0.3% y/y to €419 in February 13
Bosnia’s Federation average net wage rises 0.6% y/y in February 13
Bosnia’s Serb Republic average net wage falls 0.4% y/y to €425 in March 13
Bosnia’s jobless rate stays at 43.8% in July 2014 – employment agency 13
FISCAL SECTOR, MONETARY POLICY 13
Bosnia's central government adopts 2015 budget draft with 12.9% lower spending 13
Bosnia’s Serb Republic public revenues rise 1% y/y in Jan-Apr 14
Bosnia’s Federation sells out €10.2mn six-month T-bills 14
Bosnia’s Federation raises €9.7mn from three-month T-bills 14
Bosnia’s Federation mulls €220mn in short- and long-term debt 2015 15
Bosnia's Serb Republic raises €7.6mn from six-month T-bills, yield rises 15
FINANCIAL INTERMEDIATION 15
Bosnia’s FX reserves rise 12.1% y/y at end-March 15
Bosnia’s bank assets growth speeds up to 2.7% y/y at end-March 16
Bosnia’s bank deposits increase 5.6% y/y to €7.79bn at end-March 16
Bosnia’s M1 money supply growth slows to 8.8% y/y at end-March 17
EXTERNAL SECTOR 17
Bosnia’s foreign trade deficit shrinks 7.8% y/y in Q1 17
Bosnia’s Federation foreign trade deficit narrows 6% y/y to €460mn in Q1 18
Bosnia’s Serb Republic foreign trade deficit falls 16.6% y/y to €198mn in Q1 18
STRUCTURAL REFORMS, CORPORATE PLANS 18
Sweden to provide €100mn to Bosnia to support its EU membership preparation 18
EBRD considers €21mn loan to Bosnian retailer Bingo for network expansion 18
EBRD lends €7mn loan for biomass-fuelled heating project in Bosnia 19
Bosnian firms identify political instability as top obstacle for business 19
UK-based Mineco wins concession to build and run 4 MW hydropower plant in Bosnia 20
Kuwaiti Smart Invest, Bosnian Ans Drive launch construction of €51mn Sarajevo Tower 20
POLITICS 20
EU Council unfreezes Bosnia’s SAA 20
Bosnia’s SAA to enter in force on June 1 – EU delegation chief Wigemark 21
EU refers Bosnia to ICRG for insufficient progress on amending criminal code to fight money laundering and terrorism financing 22
IMF mission to visit Bosnia on April 28 to discuss new loan agreement – Federation’s PM Novalic 22
IMF mission to visit Bosnia to discuss new loan agreement 23

Number of pages: 23
Release Date: Thu, 14 May 2015