Bosnia and Herzegovina Country Report - July , 2015

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Bosnia and Herzegovina Country Report - July , 2015

This report covers the main macroeconomic releases from July 6 to August 5, 2015 as well as the financial and political events that took place in Bosnia during this period.
Bosnia plans to apply for EU membership by the end of this year and hopes to get a candidate status in 2017, the central government’s Prime Minister, Denis Zvizdic, said.
An IMF mission will visit Bosnia within days to resume talks on possible new agreement, according to the IMF's resident representative in Sarajevo, Ruben Atoyan.
Meanwhile, a delegation of UniCredit Group, led by the CEO Federico Ghizzoni, arrived in Bosnia to discuss with representatives of the Muslim-Croat Federation a loan, which would save the entity from financial collapse.
Bosnia’s Serb Republic – the smaller of the two entities, plans to call a referendum on the authority of the state-level judiciary institutions.
At the same time, Bosnia adopted the 2015-2018 Reform Agenda, required by the European Union (EU) as a step towards the country’s accession process.

Key points:
• CPI deflation slightly deepened to 0.5% y/y in June from 0.4% y/y in May
• The working-day adjusted industrial production rose by 3.5% y/y in June, slowing from a 7.9% y/y growth in May, due to slower expansion of mining and manufacturing sectors
• The current account deficit shrank 19.4% y/y to BAM386.9mn (€198mn) in Q1, mainly thanks to higher foreign trade surplus.

Table of Contents

EXECUTIVE SUMMARY 5
REAL SECTOR 6
1. GDP 6
Bosnia’s GDP growth slows to 1.05% in 2014 6
Bosnia's Federation 2014 GDP growth slows to 1.2% 6
Bosnia’s Serb Republic GDP expands 0.4% in 2014 7
Bosnia’s Serb Republic GDP growth slows to 1.1% y/y in Q1 7
2.Inflation 8
Bosnia’s CPI deflation deepens to 0.5% y/y in June 8
Bosnia’s Federation CPI falls 0.2% y/y in June 9
Bosnia’s Federation industrial PPI flattens y/y in June 10
Bosnia’s Serb Republic CPI deflation deepens to 0.9% y/y in June 10
2. Industry and Trade 10
Bosnia’s industrial production growth cools to 3.5% y/y in June 10
Bosnia’s retail sales growth slows to 8.3% y/y in June 10
Bosnia's Federation industrial production rise slows to 1.6% y/y in June 11
Bosnia’s Federation retail sales growth slows to 4.6% y/y in June 11
Bosnia’s Serb Republic industrial production rises 4.9% y/y in June 11
4. Tourism 12
Foreign tourist arrivals to Bosnia jump 30.2% y/y in January-May 12
Bosnia’s Serb Republic tourist arrivals rise 23.1% y/y in H1 12
5. Labour Market 13
Bosnia’s number of unemployed falls 1.3% y/y in May – stats office 13
Bosnia’s average net wage stays flat at €424 in May 13
Bosnia’s unemployment rate rises to 27.7% in April 2015 – Labour Force Survey 13
Bosnia’s Federation average net wage falls 0.4% y/y in May 13
Bosnia’s Federation unemployment rate seen rising to 29.2% in 2015 – Labour Force Survey 14
Bosnia’s Federation number of employed up 1.3% y/y in May 14
Bosnia’s Serb Republic unemployment rate to reach 25.2% in 2015 - labour force survey 14
Bosnia’s Serb Republic average net wage rises 0.7% y/y to €431 in June 14
FISCAL SECTOR, MONETARY POLICY 14
Bosnia’s indirect tax revenue rises 4% y/y to €1.6bn in Q1 14
Bosnia’s indirect tax revenue rises 4.2% y/y to €1.8bn through July 15
Bosnia’s Federation adopts budget framework for 2016-2018 15
UniCredit reportedly to provide Bosnia’s Federation loan to meet 2015 budget needs 15
Bosnia’s Federation public revenue rises 4.6% y/y in H1 16
Bosnia’s Federation sells out €10.2mn three-month T-bills issue 16
Bosnia’s Federation seeks to borrow €102.3mn from commercial banks to patch budget gap 17
Bosnia’s Federation sells out €10.2mn three-month T-bills issue 18
Bosnia’s Federation corporate tax debt rises 4.4% ytd at end-June 18
Bosnia’s Serb Republic sells out €23mn 4-year T-notes issue 18
Bosnia's Serb Republic raises €7.6mn from six-month T-bills, yield falls 19
FINANCIAL INTERMEDIATION 19
Bosnia’s bank assets grow 3% y/y at end-May 19
Bosnia’s bank deposits increase 6.2% y/y to €7.9bn at end-May 19
IMF says Bosnia’s domestically-owned banks face vulnerabilities 19
EXTERNAL SECTOR 20
Bosnia’s current account gap contracts19.4% y/y to €198mn in Q1 20
Bosnia’s net FDI shrink 78% y/y in Q1 20
Bosnia’s H1 foreign trade deficit shrinks 5.2% y/y 21
Bosnia’s Federation H1 foreign trade deficit at €1.1bn 21
Bosnia’s Serb Republic foreign trade deficit falls 14.2% y/y to €436mn in H1 22
STRUCTURAL REFORMS, CORPORATE PLANS 22
IMF mission to visit Bosnia within days to resume talks on new agreement 22
Advent, EBRD complete acquisition of Hypo’s Balkans operations 23
EBRD seeks consultant for €20mn SMEs project in Bosnia 24
POLITICS 24
Bosnia plans to apply for EU membership by end-2015 24
Constitutional court says Bosnia’s Federation government regulation on management of state companies legal 25
Serbian PM Vucic attacked with stones during historic visit to Srebrenica 26
Bosnia’s Serb Republic to call referendum on authority of state-level judiciary institutions 27
Parliament of Bosnia’s Serb Republic approves referendum on authority of state-level judiciary institutions 28
Bosnia’s Serb Republic approves EU Reform Agenda 29

Number of pages: 30
Release Date: Fri, 07 Aug 2015