Bosnia Country Report - August, 2014

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Bosnia Country Report - August, 2014

This report covers the main macroeconomic releases from August 6 until September 5, 2014 as well as the financial and political events that took place in Bosnia during this period.

Despite rising indirect tax revenues in the country since the start of the year, the Indirect Taxation Authority (UIO) has cut its net revenue estimate for 2014 - by 0.8% compared to the initial plan, to reflect the economic impact of the May floods.

The distributive trade sector, which employs some 18% of all employed in the country, contracted by 0.2% y/y due to a drop in the wholesale trade turnover. In addition, the construction sector activities recorded an annual contraction with the value of contracts of Bosnian construction companies abroad shrinking 1.1% y/y because of less activity in Africa.

The report also contains information about the reasons why Bosnia was not included in the 2014-2015 Global Competitiveness Ranking of the World Economic Forum.

On the corporate front, Tropic Group B.V. became the third largest retailer in the country and the largest in Bosnia’s Serb Republic after taking over Delhaize Group local stores earlier this year.

On a positive note, a Bosnian-Macedonian consortium of engineering firms will start the construction of the Banja Luka-Prnjavor motorway in the beginning of September.

Key points:

• CPI remained on its downward trend for twelfth consecutive month in July, dropping 0.9% y/y mainly on a softer decrease in food costs.
• The working-day adjusted industrial production grew 4.0% y/y in July after stagnating the month before.
• The number of employees in Bosnia grew 1.2% y/y in June, while the average net monthly wage rose by a nominal 0.9% y/y to BAM 829. However, the jobless rate inched up to 43.8% at end-June.

Table of Contents

EXECUTIVE SUMMARY 4
REAL SECTOR 5
1.Inflation 5
Bosnia’s producer prices tick down 0.2% y/y in July 2014 5
Bosnia’s consumer deflation softens to 0.9% y/y in July 2014 5
2. Industry and Trade 6
Bosnia’s industrial production increases 4.0% y/y in July 2014 6
Bosnia’s distributive trade edges down 0.2% y/y in Q2 2014 7
Bosnia’s Federation retail sales growth quickens to 4.8% y/y in July 2014 7
Bosnia’s Serb Republic retail sales decline 9.7% y/y in July 2014 8
Bosnia’s investments in fixed assets increase 1.8% y/y in 2013 8
Works abroad of Bosnian construction firms drop 1.1% y/y to EUR 27.9mn in H1 2014 8
Bosnia’s Federation construction activity increases 1.6% y/y in Q2 2014 9
4. Tourism 9
Foreign tourist arrivals to Bosnia down 1.9% y/y in H1 2014 9
5. Labour Market 10
Bosnia’s number of employees rises 1.2% y/y in June 2014 10
Bosnia’s average net wage rises 0.9% y/y to EUR 424 in June 2014 10
Bosnia’s jobless rate edges up to 43.8% at end-June 2014 – employment agency 11
FISCAL SECTOR, MONETARY POLICY 11
Bosnia's indirect tax office cuts 2014 revenue projection by 0.8% to EUR 2.54bn 11
Bosnia’s Federation sells EUR 25.6mn of three-year T-notes 12
Bosnia’s Federation sells out EUR 10.2mn issue of six-month T-bills 12
Bosnia’s Federation fails to sell planned EUR 10.2mn issue of three-month T-bills 12
Bosnia’s Serb Republic sells EUR 7.6mn of six-month T-bills 13
FINANCIAL INTERMEDIATION 13
Share of non-performing loans in Bosnia rises to 15.5% in Q2 2014 13
EXTERNAL SECTOR 14
Bosnia’s trade gap widens 12% y/y to EUR 2.1bn in January-July 2014 14
STRUCTURAL REFORMS, CORPORATE PLANS 14
WEF excludes Bosnia from this year’s globalcompetitiveness ranking over data quality concerns 14
Bosnia’s power firm RiTE Gacko eyes EUR 26mn investments next year 14
Tropic Group B.V. takes over Delhaize stores in Bosnia 15
Bosnia to start building EUR 158mn Banja Luka-Prnjavor motorway in Sept 2014 15
UAE’s property developer Buroj plans investments in Bosnia 16
Prevent Group's plant in Bosnia starts producing car seat covers for Opel 16
Balkan states plan to scrap roaming charges as of January 2015 16
Bosnia’s Federation govt approves renewable energy feed-in tariffs 17

Number of pages: 17
Release Date: Fri, 05 Sep 2014