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Bosnia and Herzegovina Country Report - August, 2016

  • September 2016
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 36 pages

This report covers the main macroeconomic releases from August 1 until August 31, 2016 as well as the financial and political events that took place in Bosnia during this period.

Bosnia & Herzegovina sent a properly signed letter of intent to the International Monetary Fund (IMF) on July 31, clearing its way to sign a new agreement with the fund. If the country completes the new agreement with the fund, it will also get around €2bn in funding from the European Union in the next four years.

Dragan Covic, the Croat member of Bosnia’s tripartite presidency, said that the entity has objections to the coordination mechanism adopted at the end of July, as it does not provide equal rights to them.
The constitutional court of Bosnia’s smaller entity, Republika Srpska, ruled that neither the planned referendum over the Republic Day holiday, which has been banned by the state-level constitutional court, nor the intention of the entity to announce its own version of the 2013 census results, harm the vital interests of the Bosniaks (Bosnian Muslims). Both the referendum and the census are sources of conflict between the Republika Srpska's government and the state-level authorities.
Bosniaks (Bosnian Muslims) living in Bosnia & Herzegovina’s Serb-dominated Republika Srpska, will discuss whether to secede Srebrenica from the entity in a response to the planned referendum on the Republic Day celebration.
Russian veterinary and phytosanitary body Rosselkhoznadzor has banned imports of products from Bosnia & Herzegovina as of August 4 on lack of enough proof for their safety. As a result, Bosnia could lose around BAM50mn (€25.6mn) by the end of the year.


Key points:
- CPI deflation eased to 1% y/y in July
- The working-day adjusted industrial production edged up 0.3% y/y in July
- The foreign trade gap n arrowed 4.1% y/y to BAM3.8bn (€1.9bn) in the first seven months of 2016

Table Of Contents

Bosnia and Herzegovina Country Report - August, 2016
Table of Contents

1. EXECUTIVE SUMMARY 5
2. POLITICS 6
Bosnian Croats seek amendments before supporting coordination mechanism in parliament 6
Constitutional court of Bosnia's Republika Srpska clears way to census, referendum on Republic Day 6
Bosnian leaders agree on coordination mechanism for interaction with EU 8
Bosniak president asks constitutional court to halt Republika Srpska referendum 8
Serbian president holds crisis meeting over Republika Srpksa referendum 9
3. MACROECONOMIC OVERVIEW 12
Bosnia clears way to much needed loan deal with IMF 12
Bosnia to unlock €2bn funds from the EU if it strikes deal with IMF 13
4. REAL SECTOR 13
4.1. GDP, forecasts 13
Bosnia's GDP seen to rise by 3.1% in 2016 13
4.2. Inflation 13
CPI deflation in Federation of Bosnia and Herzegovina softens to 1% y/y in July 14
CPI deflation in Bosnia softens to 1% y/y in July 14
Bosnia's industrial producer prices fall 0.5% y/y in July 15
Bosnian Federation's industrial PPI deepens annual fall in July 16
4.3. Industry and trade 17
4.3.1. Industrial production 17
Bosnia's industrial production growth accelerates to 7.2% y/y in June 17
Bosnia's industrial production growth decelerates to 0.3% y/y in July 18
Bosnian Federation's industrial production turns to 1.7% y/y fall in July 18
4.4. Labour and retail 19
4.4.1. Unemployment and wages 19
Bosnia's registered unemployment rate falls to 41.7% in May 19
Bosnia's average net wage growth decelerates in June 20
Number of registered unemployed in Bosnia down 4% y/y in June 20
4.4.2. Retail 21
Bosnian Federation's retail sales ease annual fall in June 21
Bosnia's retail sales growth accelerates to 4.9% y/y in June 22
Bosnian Federation's retail sales turn to growth in July 23
5. EXTERNAL SECTOR AND TRADE 24
5.1. Balance of payments 24
Bosnia's Q1 current account gap expands 64.9% y/y to €183.3mn 24
5.2. Trade 24
Bosnia's foreign trade deficit narrows 4.1% y/y in January-July 24
5.3. Foreign direct investment (FDI) 25
Bosnia's net FDI sinks 34.8% in 2015 25
5.4. External debt 25
Bosnia's foreign debt grows 2.9% y/y to €4.5bn at end-2015 25
5.5. Foreig reserves 26
Bosnia's FX reserves grow 10.9% y/y at end-June 26
6. PUBLIC SECTOR 27
6.1. Budget 27
Bosnia's Republika Srpska 7-mo public revenues fall 1% y/y 27
Bosnia's indirect tax revenue rises 1.75% y/y to €1.87bn 27
Bosnian Federation's 7-mo public revenues rise 10.3% y/y 28
6.2. Government debt 28
Bosnia's Republika Srpska sells out €20.5mn 5-year T-bond issue 28
Bosnian Federation sells out €10.2mn 3-month T-bills issue, yield turns negative 29
7. FINANCIAL SECTOR AND CAPITAL MARKETS 29
7.1. Banking system 29
Bosnia's M1 money supply grows 14.2% y/y at end-June 29
Bosnia's bank assets grow 3.9% y/y in June 30
Bosnian bank deposits grow 7.3% y/y at end-June 30
7.2. Credit ratings 31
Bosnia is rated B/B by SandP, B3 by Moody's 31
8. INDUSTRY AND SECTOR NEWS 31
World Bank lends Bosnian Federation €58mn for road sector modernisation 31
Russia bans imports from Bosnia on lack of production security 32
Bosnia denies receiving information on Russia import ban 32
Bosnia to lose €25.6mn from Russia import ban 33
Russia to send phytosanitary inspectors to Bosnia on August 18 33
9. MAJOR CORPORATE NEWS 34
Bosnia's Telekom Srpske H1 cons net profit shrinks 34.5% y/y to €13.7mn 34
Bosnian Federation offers state stake in tobacco maker Fabrika Duhana Sarajevo for sale 34
Foundation stone of €2.3bn Buroj Ozone resort to be laid in Bosnia on September 19 35
VW, Bosnian supplier resolve dispute that halted production in 6 VW plants 35
Bosnia's Sarajevo bourse postpones auction of Fabrika Duhana Sarajevo stake 36

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