Bosnia and Herzegovina Country Report - November, 2016

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Bosnia and Herzegovina Country Report - November, 2016

This report covers the main macroeconomic releases from November 1 until November 30, 2016 as well as the financial and political events that took place in Bosnia during this period.
Bosnia & Herzegovina is among the countries assessed by its citizens to have the most severe corruption problems, according to a survey of Transparency International on Europe and Central Asia.
Three Western Balkan countries – Bosnia & Herzegovina, Albania and Macedonia – are among the top nine in terms of the percentage of emigrants, according to 2015 data from the United Nations, the Pew Research Center reported.
The government of Bosnia & Herzegovina said on November 10 it has approved a draft agreement with Russia on the settlement of a 5.2mn debt owed by the former USSR to the Balkan state when it was part of former Yugoslavia.
Bosnia & Herzegovina should focus on improving the business environment in the country in order to help reduce the jobless rate and boost FDI inflows, the International Monetary Fund (IMF) said.
Bosnia & Herzegovina’s economic growth is expected to accelerate to 3.4% in 2017 from an estimated 3.1% this year, according to the government’s economic projections for 2017-2019, adopted on November 10.

Key points:
• CPI deflation eased to 0.7% in October
• The working-day adjusted industrial production increased 4.5% y/y in October
• The foreign trade gap narrowed 3.6% y/y to BAM5.55bn (€2.84bn) in the first ten months of 2016

Table of Contents

1. EXECUTIVE SUMMARY 5
2. POLITICS 6
Croatian defence minister reportedly among Bosnian prosecutors’ war crimes suspects 6
Bosnia’s Republika Srpska starts preparations for celebration of banned Republic Day 7
Bosnia among countries with most severe corruption problems, TI survey shows 7
Bosnia, Albania and Macedonia among top 9 countries with highest emigration level 8
Bosnia, Russia agree on repayment of 5.2mn Soviet-era debt 8
Bosnia needs to make progress on political, economic criteria, EC report says 9
3. MACROECONOMIC OVERVIEW 10
IMF urges Bosnia to focus on business environment to boost employment, FDI 10
4. REAL SECTOR 11
4.1. GDP, forecasts 11
Bosnia’s economic growth to speed up to 3.4% in 2017, government says 11
EBRD lowers Bosnia’s 2016 GDP growth forecast to 2.7% 12
4.2. Inflation 12
Bosnia’s industrial producer prices edge up 0.1% y/y in October 12
CPI deflation in Bosnia cools to 0.7% y/y in October 13
4.3. Industry and trade 14
4.3.1. Industrial production 14
Bosnia’s industrial production growth accelerates to 4.5% y/y in October 14
4.3.2. Construction volume 15
Bosnia’s building permits rise 10.6% y/y in Q3 15
Works Bosnian construction firms abroad drop 3.4% y/y to €16.4mn in Q3 15
4.4. Labour and retail 16
4.4.1. Unemployment and wages 16
Bosnia’s net wage rises 1.1% y/y in September 16
4.4.2. Retail 16
Bosnia’s retail sales growth cools to 7.1% y/y in September 16
5. EXTERNAL SECTOR AND TRADE 17
5.1. Balance of payments 17
Bosnia’s Q1 current account gap expands 64.9% y/y to €183.3mn 17
5.2. Trade 17
Bosnia’s 10-mo foreign trade deficit narrows 3.6% y/y 17
5.3. Foreign direct investment (FDI) 18
Bosnia’s net FDI more than doubles y/y to €66.7mn in Q1 2016 18
5.4. External debt 18
Bosnia’s foreign debt falls 0.2% y/y to €4.4bn at end-June 18
5.5. Foreig reserves 19
Bosnia’s FX reserves grow 14.1% y/y at end-September 19
6. PUBLIC SECTOR 20
6.1. Budget 20
Bosnia’s central govt adopts 2017 budget with higher spending 20
6.2. Government debt 20
Bosnian Federation raises €8.1mn from 12-month T-bills issue at negative yield 20
Bosnian Federation sells out €10.2mn 9-month T-bills issue at negative yield 21
Bosnia’s Republika Srpska sells out €12.8mn 5-year T-bond issue 21
7. FINANCIAL SECTOR AND CAPITAL MARKETS 21
7.1. Banking system 21
Bosnian banks face difficulties after EU puts country on blacklist 21
Bosnia’s bank assets grow 4% y/y in September 22
Bosnian bank deposits grow 7.4% y/y at end-September 23
Bosnia’s M1 money supply up 14.3% y/y at end-September 23
7.2. Credit ratings 24
S&P affirms Bosnia’s B/B rating with stable outlook 24
8. MAJOR CORPORATE NEWS 25
CID launches buyout bid for 60.09% stake in Bosnian tobacco maker FDS 25
Bosnia's Brod refinery net loss deepens sharply in January-September 26
Bosnia’s EPBiH signs deal with China’s Eximbank on new unit at Tuzla TPP 26

Number of pages: 27
Release Date: Wed, 14 Dec 2016