Country Report Bosnia-Hercegovina September 2009

Outlook for 2009-10

• The central government of Bosnia and Hercegovina (BiH) is expected to stay in office until the end of its term in late 2010, despite many differences within the ruling coalition.
• Mustafa Mujezinovic, the new prime minister of BiH's larger entity, the Bosniak (Bosnian Muslim)-Bosnian Croat Federation, appears to reflect closely the policies of the leading Bosniak politician, Sulejman Tihic.
• Mr? Tihic's success in consolidating his position may help to revive talks on constitutional reforms with BiH's Serb and Croat politicians, but only if the Bosnian Serb leader, Milorad Dodik, adopts a more pragmatic approach.
• As prime minister of the Bosnian Serb entity, Republika Srpska (RS), Mr? Dodik is expected to continue to assert the powers of his entity.
• The Federation will follow the RS in introducing cuts in expenditure to meet IMF conditions for a stand-by agreement on providing budget support.
• The Economist Intelligence Unit forecasts that real GDP will contract by 3% in 2009, reflecting tighter macroeconomic policies and the recession in BiH's main export markets. We expect modest growth, of 0.5%, in 2010.
• We forecast a halving of the current-account deficit, from the equivalent of 14.9% of GDP in 2008 to an average of 8.6% of GDP in 2009-10, as a result of contracting import demand and lower oil prices.

Monthly review

• The international High Representative in BiH, Valentin Inzko, has lifted a five-year ban on the holding of public office by a former Bosnian Serb leader, Dragan Kalinic, and three of his associates.
• Mr? Inzko's office intervened in August in a bid to break the deadlock between local politicians over the drawing up of an inventory of state property.
• The Federation government's move to start implementing spending cuts, agreed with the IMF, has prompted protests from those most affected??