Bosnia and Herzegovina Country Report - January, 2015

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Bosnia and Herzegovina Country Report - January, 2015

This report covers the main macroeconomic releases from January 6 until February 5, 2015 as well as the financial and political events that took place in Bosnia during this period.
The International Monetary Fund (IMF) decided to delay the disbursement of a new loan tranche under its stand-by agreement with Bosnia because of insufficient reforms.
The World Bank estimated that Bosnia’s economic growth should speed up to 1.5% in 2015 from an estimated 0.4% in 2014. The GDP is expected to further accelerate its growth by 2.5% and 3.0% in 2016 and 2017, respectively. At the same time, the European Bank for Reconstruction and Development (EBRD) left unchanged its 2015 growth projection for Bosnia at 2.7% in the January edition of its Regional Economic Prospects.
Bosnian government has agreed to launch talks with the European Union to enter EU’s Competitiveness of Enterprises and Small and Medium-Sized Enterprises Programme (COSME), a statement on the cabinet’s website showed.
On the corporate front, UAE’s property developer Buroj announced plans to invest BAM4.5bn (€2.3bn) in building a tourist complex in Bosnian Serb Republic’s Trnovo municipality near Sarajevo. The complex should include thousands of apartments, several hotels, trade centre and the necessary infrastructure.
The report also contains information about the resignation of Bosnia’s foreign trade minister Boris Tucic due to lack of consent over actions of state institutions on the process of issuing permits for international trade with military equipment.

Key points:
• CPI fell 0.4% y/y in December after staying flat in the previous month.
• The working-day adjusted industrial production contracted 2.4% y/y in December, deepening from a 0.5% annual decline in November due to deteriorated performance in mining and manufacturing sectors.
• The current account deficit widened 50.1% y/y in the first nine months of 2014, mainly on the back of higher foreign trade gap and lower services income from abroad.

Table of Contents

EXECUTIVE SUMMARY 5
Bosnia’s foreign trade minister Tucic resigns 6
IMF postpones Bosnia loan tranche over lack of reforms 6
World Bank sees SEE countries' growth accelerating to 1.3% in 2015 6
World Banks sees Bosnia’s GDP growing by 1.5% in 2015 7
Bosnia among first Western Balkan countries to exit recession – c-bank governor 8
EBRD keeps Bosnia’s 2015 GDP growth forecast unchanged at 2.7% 8
Bosnia to start talks to join EU’s financing programme for SMEs 9
REAL SECTOR 9
1. GDP 9
Bosnia’s economy expands 0.6% y/y in Q3 9
2. Inflation 10
Bosnia’s industrial PPI up 0.8% y/y in December 10
Bosnia’s CPI edges down 0.4% y/y in December 10
Bosnia’s Federation CPI edges down 0.2% y/y in December 11
Bosnia’s Federation industrial PPI edges up 0.1% y/y in December 12
Bosnia’s Serb Republic producer prices edge down 0.2% y/y in December 12
Bosnia’s Serb Republic CPI deflation deepens to 0.8% y/y in December 13
3. Industry and Trade 13
Bosnia’s industrial production falls 2.4% y/y in December 13
Bosnia’s retail sales growth slows to 3.8% y/y in December 13
Bosnia’s foreign trade deficit widens 10.7% y/y in 2014 14
Bosnia's Federation industrial production down 2.9% y/y in December 14
Bosnia’s Federation retail sales growth quickens to 6.7% y/y in December 15
Bosnia’s Federation foreign trade deficit at €196.5mn in December 15
Bosnia’s Serb Republic industrial production falls 1.5% y/y in December 15
Bosnia’s Serb Republic foreign trade deficit at €1.15bn in 2014 16
4. Tourism 16
Foreign tourist arrivals to Bosnia rise 1.2% y/y in January-November 16
Bosnia’s Federation tourist arrivals rise 9.8% y/y in December 16
Bosnia’s Serb Republic tourist arrivals rise 2.6% y/y in 2014 16
5. Labour Market 17
Bosnia’s number of unemployed falls 0.8% y/y in 2014 – stats office 17
Bosnia’s registered unemployment rate stays at 43.6% in November 17
Bosnia’s average net wage falls 0.7% y/y to €420.5 in November 17
Bosnia’s Federation number of employed up 2.6% y/y in November 17
Bosnia’s Federation average net wage falls 1.7% y/y in November 18
Bosnia’s Serb Republic average net wage up 1.9% y/y to €427 in December 18
FISCAL SECTOR, MONETARY POLICY 18
Bosnia’s indirect tax revenue at €3.2bn in 2014 18
Bosnia’s Federation public revenue rises 5.2% y/y in 2014 18
Bosnia’s Federation corporate tax debt rises 21.5% y/y at end-2014 19
Bosnia’s Serb Republic public revenues rise 24% y/y in January 19
Bosnia’s Serb Republic public revenues rise 4% y/y in 2014 19
Bosnia’s Serb Republic revenue from gambling fees rises 4.7% y/y in 2014 20
Bosnia's Serb Republic raises €10mn from six-month T-bills, yield drops 20
FINANCIAL INTERMEDIATION 20
Bosnia’s FX reserves rise 11.6% y/y at end-November 20
Bosnia’s M1 money supply growth speeds up to 9% y/y at end-November 21
EXTERNAL SECTOR 21
Bosnia’s current account gap widens 50% y/y to €787.8mn in January-September 21
STRUCTURAL REFORMS, CORPORATE PLANS 22
Croatia’s Janaf signs oil transport deals with Hungary’s MOL, Bosnia’s Optima Group 22
Swedish Trust Fund to grant €9.5mn to Bosnia’s Federation for water supply project 22
Bosnia's NLB Banka to raise capital by €7.7mn via share issue in H1 2015 23
UAE’s property developer Buroj to invest €2.3bn in tourist complex in Bosnia 23
Bosnia’s c-bank urges local arms of Hypo Bank to offer acceptable solution for CHF loan debtors 23
Bosnia to call tenders for €15.3mn wastewater plant in Q2 23
ArcelorMittal’s Bosnian plant to invest €4.65mn in new facilities 24
CHF strengthening to affect negatively Bosnian firms and individuals – Federation’s c-bank 24
Borsa Istanbul raises stake in Sarajevo bourse to 9.89% 24
Bosnia’s Federation to draw €37.5mn loan from EIB for 20MW Vranduk hydropower plant project 25
Bosnia’s Serb Republic to invest €115mn in agricultural sector in 2015 25

Number of pages: 25
Release Date: Sun, 08 Feb 2015