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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 EUR2bn 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 (EUR25.6mn) by the end of the year.



Key points:

oCPI deflation eased to 1% y/y in July

oThe working-day adjusted industrial production edged up 0.3% y/y in July

oThe foreign trade gap n arrowed 4.1% y/y to BAM3.8bn (EUR1.9bn) in the first seven months of 2016

Table Of Contents

Bosnia and Herzegovina Country Report - August, 2016
1.EXECUTIVE SUMMARY5

2.POLITICS6

Bosnian Croats seek amendments before supporting coordination mechanism in parliament6

Constitutional court of Bosnia's Republika Srpska clears way to census, referendum on Republic Day6

Bosnian leaders agree on coordination mechanism for interaction with EU8

Bosniak president asks constitutional court to halt Republika Srpska referendum8

Serbian president holds crisis meeting over Republika Srpksa referendum9

3.MACROECONOMIC OVERVIEW12

Bosnia clears way to much needed loan deal with IMF12

Bosnia to unlock EUR2bn funds from the EU if it strikes deal with IMF13

4.REAL SECTOR13

4.1.GDP, forecasts13

Bosnia's GDP seen to rise by 3.1% in 201613

4.2.Inflation13

CPI deflation in Federation of Bosnia and Herzegovina softens to 1% y/y in July14

CPI deflation in Bosnia softens to 1% y/y in July14

Bosnia's industrial producer prices fall 0.5% y/y in July15

Bosnian Federation's industrial PPI deepens annual fall in July16

4.3.Industry and trade17

4.3.1.Industrial production17

Bosnia's industrial production growth accelerates to 7.2% y/y in June17

Bosnia's industrial production growth decelerates to 0.3% y/y in July18

Bosnian Federation's industrial production turns to 1.7% y/y fall in July18

4.4.Labour and retail19

4.4.1.Unemployment and wages19

Bosnia's registered unemployment rate falls to 41.7% in May19

Bosnia's average net wage growth decelerates in June20

Number of registered unemployed in Bosnia down 4% y/y in June20

4.4.2.Retail21

Bosnian Federation's retail sales ease annual fall in June21

Bosnia's retail sales growth accelerates to 4.9% y/y in June22

Bosnian Federation's retail sales turn to growth in July23

5.EXTERNAL SECTOR AND TRADE24

5.1.Balance of payments24

Bosnia's Q1 current account gap expands 64.9% y/y to EUR183.3mn24

5.2.Trade24

Bosnia's foreign trade deficit narrows 4.1% y/y in January-July24

5.3.Foreign direct investment (FDI)25

Bosnia's net FDI sinks 34.8% in 201525

5.4.External debt25

Bosnia's foreign debt grows 2.9% y/y to EUR4.5bn at end-201525

5.5.Foreig reserves26

Bosnia's FX reserves grow 10.9% y/y at end-June26

6.PUBLIC SECTOR27

6.1.Budget27

Bosnia's Republika Srpska 7-mo public revenues fall 1% y/y27

Bosnia's indirect tax revenue rises 1.75% y/y to EUR1.87bn27

Bosnian Federation's 7-mo public revenues rise 10.3% y/y28

6.2.Government debt28

Bosnia's Republika Srpska sells out EUR20.5mn 5-year T-bond issue28

Bosnian Federation sells out EUR10.2mn 3-month T-bills issue, yield turns negative29

7.FINANCIAL SECTOR AND CAPITAL MARKETS29

7.1.Banking system29

Bosnia's M1 money supply grows 14.2% y/y at end-June29

Bosnia's bank assets grow 3.9% y/y in June30

Bosnian bank deposits grow 7.3% y/y at end-June30

7.2.Credit ratings31

Bosnia is rated B/B by SandP, B3 by Moody's31

8.INDUSTRY AND SECTOR NEWS31

World Bank lends Bosnian Federation EUR58mn for road sector modernisation31

Russia bans imports from Bosnia on lack of production security32

Bosnia denies receiving information on Russia import ban32

Bosnia to lose EUR25.6mn from Russia import ban33

Russia to send phytosanitary inspectors to Bosnia on August 1833

9.MAJOR CORPORATE NEWS34

Bosnia's Telekom Srpske H1 cons net profit shrinks 34.5% y/y to EUR13.7mn34

Bosnian Federation offers state stake in tobacco maker Fabrika Duhana Sarajevo for sale34

Foundation stone of EUR2.3bn Buroj Ozone resort to be laid in Bosnia on September 1935

VW, Bosnian supplier resolve dispute that halted production in 6 VW plants35

Bosnia's Sarajevo bourse postpones auction of Fabrika Duhana Sarajevo stake36

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