Country Report Bosnia-Hercegovina June 2009

Outlook for 2009-10

• The government of the Bosniak (Bosnian Muslim)-Bosnian Croat Federation, the larger of the two entities in Bosnia and Hercegovina (BiH), is set to be reshuffled following the resignation of the prime minister, Nedzad Brankovic.
• The Federation's new government is expected to be more in tune with the policies of the leading Bosniak politician, Sulejman Tihic, who was re-elected leader of the Party of Democratic Action (SDA) at the end of May.
• MrTihic's victory over his less pragmatic opponents may help to revive the stalled talks on constitutional reform with Bosnia's Serb and Croat politicians.
• The Economist Intelligence Unit forecasts that real GDP will contract by 2% in 2009, reflecting tighter macroeconomic policies and the recession in BiH's main export markets. We expect modest growth, of 0.5%, to return in 2010.
• We forecast a contraction in the current-account deficit, from an estimated 15.7% of GDP in 2008 to an average of 8.8% of GDP in 2009-10, as a result of slowing import demand and lower oil prices.

Monthly review

• MrBrankovic tendered his resignation from the post of prime minister of the Federation on May 27th, saying that his government had lost political support.
• The prime minister's resignation followed the re-election of MrTihic as leader of the SDA by a comfortable majority over his opponent, Bakir Izetbegovic, who is a close political ally of MrBrankovic.
• The assembly of BiH's Bosnian Serb entity, Republika Srpska (RS), has called on the new High Representative, Valentin Inzko, to reinstate officials who were dismissed by his predecessors for obstructing BiH's reintegration.
• The US vice-president, Joe Biden, signalled US re-engagement in BiH by visiting the country as part of a tour of the Balkans in May, although he announced no new initiatives to promote reforms.
• The IMF agreed in early May to grant a three-year stand-by loan of US$1.5bn to BiH to support the country's macroeconomic stability.
• The Federation posted a budget surplus of KM80m (US$53m) in the first quarter of 2009, as it began to rein in expenditure ahead of the IMF deal.
• Industrial output in the Federation shrank by 5.9% year on year in April, as demand remained weak in BiH's main export markets. In the RS, output grew by 28.1%, following the resumption of work at the Bosanski Brod oil refinery.
• The trade deficit in January-April amounted to KM2.2bn (US$1.7bn), a drop of 26.1% on the year-earlier period, as imports declined faster than exports.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49
NAICS Code: 22