Country Report Bosnia-Hercegovina October 2017

Country Report Bosnia-Hercegovina October 2017

  • October 2017 •
  • Report ID: 325788

Outlook for 2018-22



  • Shifting governing coalitions of nationalist parties and conflict within the complex institutional framework of Bosnia and Herecegovina (BiH) pose a risk of political instability.
  • A lack of consensus among BiH politicians concerning the adoption of reforms and the weakness of the entity governments will continue to delay the country's EU integration and IMF programme.
  • Milorad Dodik, the president of Republika Srpska (RS), will continue to assert the powers of the RS against efforts by Western countries and Bosniak (Bosnian Muslim) leaders to strengthen central state institutions.
  • The RS and the Bosniak-Bosnian Croat Federation (BiH's other entity) will tighten fiscal policy, either as required by BiH's IMF programme or owing to a lack of financing. This could fuel social unrest similar to that seen in 2014.
  • After real GDP growth of 2.9% in 2016 and an estimated 3% in 2017, The Economist Intelligence Unit forecasts that growth will average 2.9% per year in 2018-22, driven by private consumption and investment growth.
  • The large grey economy, a poor demographic outlook, a burdensome business environment, an oversized public sector and political instability prevent a stronger growth outlook.
  • Despite higher average global energy prices, we estimate that the current-account deficit will narrow to 4.7% of GDP this year, from 5% in 2016, as exports rebound. We forecast an average annual deficit of 5% of GDP in 2018-22.


Review



  • Several European leaders have raised concerns that BiH is becoming a hub for radical Islamist terrorism.
  • On September 19th an IMF mission concluded that no progress had been made for the release of the second tranche of the extended fund facility (EFF).
  • In the second quarter year-on-year real GDP growth slowed to 1.7%, from 2.8% in the first quarter.
  • In July the number of registered unemployed in BiH amounted to 486,309-6.2% lower than in July 2016.
  • Year-on-year working-day-adjusted industrial output growth accelerated to 7.1% in August, from 5.6% in July and 3.1% in June.
  • In August year-on-year consumer price inflation was 1%.
  • In the first half of 2017 the current-account deficit declined to KM794.3m (US$481.4m), from KM849.5m in the same period in 2016.


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Country=BosniaAndHerzegovina Date=201710 Topic=Supply Publisher=TheEconomistIntelligenceUnit Price=1000