Bos­nia&Herze­gov­ina

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In 2015, Bos­nia and Herze­gov­ina’s gross do­mes­tic prod­uct (GDP) is ex­pected to grow by be­tween 2.0% and 2.5%, ac­cord­ing to fore­casts of the World Bank, the Euro­pean Bank for Re­con­struc­tion and Devel­op­ment (EBRD), and the In­ter­na­tional Mon­e­tary Fund (IMF). The fac­tors, which will sup­port the eco­nomic growth, in­clude ex­ports and in­dus­trial pro­duc­tion, which will ben­e­fit from cheaper oil prices, as well as in­vest­ments in in­fra­struc­ture in ar­eas dam­aged by the record floods of May 2014.

Bos­nia man­aged to achieve eco­nomic growth in 2014 de­spite the tor­ren­tial rain­fall that trig­gered wide-spread floods in May and caused dam­ages es­ti­mated at 2.0 bil­lion euro or 15% of the coun­try's GDP. Re­tail sales and ex­ports helped back eco­nomic ac­tiv­ity, along with an in­crease in in­dus­trial out­put. The un­em­ploy­ment rate, in­clud­ing youth un­em­ploy­ment, con­tin­ued to be one of the high­est in Europe due to lack of eco­nomic and reg­u­la­tory re­forms.

Ac­cord­ing to the Euro­pean Com­mis­sion's Progress Re­port on Bos­nia and Herze­gov­ina, the coun­try's govern­ment made very lim­ited progress on po­lit­i­cal and eco­nomic is­sues and on mov­ing towards Euro­pean stan­dards in 2014. Con­cern­ing the eco­nomic cri­te­ria, Bos­nia and Herze­gov­ina achieved in­suf­fi­cient progress towards be­com­ing a func­tion­ing mar­ket econ­omy.

Bos­nia, sim­i­lar to other coun­tries in South­east Europe, re­lies on re­mit­tances from em­i­grants. In 2014, re­mit­tances grew by 3.3% to 1.64 bil­lion euro or 12.5% of the coun­try's pro­jected full-year GDP, ac­cord­ing to data from the World Bank.

The coun­try fell to the 107th place in the World Bank's Do­ing Busi­ness 2015 re­port from the 104th po­si­tion in the 2014 edi­tion. It did, how­ever, im­prove its po­si­tion in the re­port's Get­ting Credit and Reg­is­ter­ing Prop­erty but dropped in the rank­ing in all other cat­e­gories.

The coun­try's GDP in­creased by a real 0.8% to 25.623 bil­lion Bos­nian marka in 2014, ac­cord­ing to pro­vi­sional data of Bos­nia and Herze­gov­ina's Agency of Sta­tis­tics (BHAS).

The gross value added (GVA) gen­er­ated by the na­tional econ­omy in­creased by 0.7% in value in 2014 and to­talled 20.93 bil­lion Bos­nian marka. The in­dus­trial sec­tor shrank by 3.3% and its share in the GVA struc­ture de­clined to 21.4% from 22.3%. The ser­vices sec­tor recorded a 3.1% an­nual in­crease, equal to

a 69.6% share in the GVA, com­pared to 67.9% in the pre­vi­ous year. The agri­cul­tural sec­tor reg­is­tered a drop of 9.6%, thus de­creas­ing its share in the GVA to 7.6% from 8.5%. The con­struc­tion sec­tor grew by 6.5% and its share inched up by 0.3 per­cent­age points to 5.2%.

In­dus­trial out­put was up by 0.1% on the year in 2014. The man­u­fac­tur­ing sec­tor grew by 3.8%, while the elec­tric­ity and gas sup­ply, and min­ing sec­tors de­clined by 9.6% and 2.1%, re­spec­tively.

The seg­ments which reg­is­tered the high­est an­nual de­clines in 2014 were man­u­fac­ture of com­puter, elec­tronic and op­ti­cal prod­ucts with a 49.7% drop, fol­lowed by man­u­fac­ture of to­bacco prod­ucts with a fall of 14.1%, and man­u­fac­ture of other trans­port equip­ment which re­ported a de­crease of 11.8%, ac­cord­ing to BHAS data.

Re­tail sales grew by 11.6% y/y in the fourth quar­ter of 2014, while whole­sale trade de­creased by 1.0%, ac­cord­ing to BHAS data. Whole­sale trade with other ma­chin­ery, equip­ment and sup­plies marked the high­est in­crease, of 17.3%, while sale, main­te­nance and re­pair of mo­tor­cy­cles and re­lated parts and ac­ces­sories de­clined the most by 21.1%.

Bos­nia and Herze­gov­ina reg­is­tered an av­er­age an­nual de­fla­tion of 0.9% in 2014, com­pared to a 0.1% de­fla­tion a year ago. In 2014 the high­est an­nual de­crease in consumer prices was reg­is­tered in tele­phone and tele­fax equip­ment, of 5.5%, fol­lowed by cloth­ing, and footwear, which got cheaper by 5.3% and 4.7% re­spec­tively. The consumer groups that recorded in­fla­tion were led by travel ser­vices, which got more ex­pen­sive by 12.6%, fol­lowed by to­bacco with 9.2%, and postal ser­vices with 3.5%.

Un­em­ploy­ment in Bos­nia and Herze­gov­ina fell to 43.6% of the to­tal labour force in the last month of 2014 from 44.6% a year ear­lier, ac­cord­ing to data of BHAS. The em­ployed population aged 15 years and older was 708,000 in De­cem­ber 2014, up by 2.7% y/y. Broad money in Bos­nia and Herze­gov­ina (money ag­gre­gate M2) in­creased by 7.8% y/y and reached 17.4 bil­lion marka in De­cem­ber 2014, ac­cord­ing to data of the Cen­tral Bank of Bos­nia and Herze­gov­ina (CBBH).

Quasi-money, which in­cludes other de­posits in do­mes­tic and for­eign cur­rency, as well as trans­ferrable de­posits in for­eign cur­rency, in­creased by 6.0% to 9.96 bil­lion marka. Money ag­gre­gate M1, or nar­row money, jumped by 9.4% to 7.32 bil­lion marka.

Loans to the non-govern­ment sec­tor to­talled 15.7 bil­lion marka in De­cem­ber 2014, up by 1.8% y/y, ac­cord­ing to CBBH.

Loans to non-fi­nan­cial cor­po­ra­tions fell by 1.5% to 8.2 bil­lion marka in De­cem­ber, while house­hold loans rose by 5.7% to 7.466 bil­lion marka. House pur­chas­ing loans were down by 2.5% to 605 mil­lion marka.

The to­tal ex­ter­nal govern­ment debt amounted to 8.2 bil­lion marka in the fourth quar­ter of 2014, up by 10.4% on the year. In com­par­i­son to the third quar­ter of 2014, the govern­ment ex­ter­nal debt grew by 62 mil­lion marka, ac­cord­ing to CBBH.

Bos­nia and Herze­gov­ina's main for­eign cred­i­tor as of the fourth quar­ter of 2014 were the World Bank's In­ter­na­tional Devel­op­ment As­so­ci­a­tion, which ac­counted for 22.1% of the to­tal govern­ment ex­ter­nal debt.

The cur­rent ac­count gap widened to 2.08 bil­lion marka in 2014 from 1.5 bil­lion marka in 2013, ac­cord­ing to cen­tral bank sta­tis­tics data.

Source: In­ter­na­tional Mon­e­tary Fund (IMF) World Eco­nomic Out­look Data­base – April 2015

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