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Bosnia and Herzegovina Country Report - September, 2016

  • October 2016
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 35 pages

This report covers the main macroeconomic releases from September 1 until September 30, 2016 as well as the financial and political events that took place in Bosnia during this period.

The EU General Affairs Council decided on September 20 to recommend to the European Council to launch the procedure for granting Bosnia & Herzegovina candidate status, rewarding the country for its efforts to move towards its EU future despite internal tensions and disagreements.

The International Monetary Fund (IMF) approved a three-year extended arrangement with Bosnia & Herzegovina for an amount equivalent to SDR443.042mn (EUR553.3mn). The IMF will immediately disburse around EUR79.2mn to Bosnia, and the remainder will be available in 11 installments subject to quarterly reviews.

The World Bank has improved its projection for Bosnia & Hercegovina's economic growth in 2016 to 2.8% from 3% last year, which should result in the creation of new jobs.

99.8% of voters in Bosnia & Herzegovina's Republika Srpska supported the celebration of Republic Day, despite the holiday being declared unconstitutional by the state-level constitutional court.

Bosnia & Herzegovina's state-level prosecution has launched an investigation into the September 25 referendum in Republika Srpska, and has reportedly summoned the president of the entity, Milorad Dodik, for questioning.

The High Judicial and Prosecutorial Council of Bosnia and Herzegovina (VSTV BiH) said on September 28 it has temporary suspended chief prosecutor Goran Salihovic, following a request from the country's Office of Disciplinary Council (UDT). The council provided no explanation, but local news outlet Klix.ba wrote on the same day that the chief prosecutor has been investigated on suspicion of abuse of office, apparently benefitting the president of Republika Srpska, Milorad Dodik.



Key points:

oCPI deflation slightly deepened to 1.2% y/y in August

oThe working-day adjusted industrial production increased 7.2% y/y in June

oThe foreign trade gap narrowed 3.3% y/y to BAM4.36bn (EUR2.23bn) in the first eight months of 2016

Table Of Contents

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

2.POLITICS6

Bosnia's government adopts SAA adjustment protocol6

EU General Affairs Council recommends launch of application procedure for Bosnia6

99.8% vote in favour of Republic Day holiday in Republic Srpska referendum7

Bosnian prosecution starts investigation into Republika Srpska's banned referendum9

President of Republika Srpska to sue Bosnian president, challenge constitutionality of Independence Day10

Bosnia suspends chief prosecutor on suspicion of favouring Republika Srpska president12

3.MACROECONOMIC OVERVIEW13

IMF executive board approves EUR553.3mn loan deal with Bosnia13

4.REAL SECTOR14

4.1.GDP, forecasts14

World Bank raises Bosnia's 2016 GDP growth forecast to 2.8%14

4.2.Inflation15

CPI deflation in Bosnia deepens to 1.2% y/y in August15

4.3.Industry and trade16

4.3.1.Industrial production16

Bosnia's industrial production growth accelerates to 7.2% y/y in June16

Bosnia's industrial production growth decelerates to 0.3% y/y in July17

4.4.Labour and retail18

4.4.1.Unemployment and wages18

Bosnia's registered unemployment rate falls to 41.6% in June18

Wages dip in Bosnia but rebound expected by year-end19

4.4.2.Retail19

Bosnia's retail sales growth accelerates to 4.9% y/y in June19

5.EXTERNAL SECTOR AND TRADE20

5.1.Balance of payments20

Bosnia's Q1 current account gap expands 64.9% y/y to EUR183.3mn20

5.2.Trade21

Bosnia's 8-mo foreign trade deficit narrows 3.3% y/y21

5.3.Foreign direct investment (FDI)21

Bosnia's net FDI more than doubles y/y to EUR66.7mn in Q1 201621

5.4.External debt22

Bosnia's foreign debt falls 0.2% y/y to EUR4.4bn at end-June22

5.5.Foreig reserves22

Bosnia's FX reserves grow 8.9% y/y at end-July22

6.PUBLIC SECTOR23

6.1.Budget23

Bosnia's H1 consolidated budget revenue at 55% of end-year plan23

Bosnian Republika Srpska's H1 budget revenue at 97% of plan24

Bosnia's indirect tax revenue rises 3% y/y to EUR2.18bn24

Bosnian Republika Srpska's public revenues stay flat y/y through August25

6.2.Government debt25

Bosnia's Republika Srpska sells out EUR20.5mn 7-year T-bond issue25

Bosnia's Republika Srpska raises EUR7.7mn in 6-month T-bills26

7.FINANCIAL SECTOR AND CAPITAL MARKETS26

8.1.Banking system26

Bosnia's M1 money supply grows 14.7% y/y at end-July26

Bosnian bank deposits grow 7.1% y/y at end-July27

Bosnia's bank assets grow 3.6% y/y in July27

Share of non-performing loans in Bosnia falls to 12.1% in Q228

8.2.Credit ratings29

SandP affirms Bosnia's B/B rating with stable outlook29

8.INDUSTRY AND SECTOR NEWS29

Bosnia formally asks Russia to lift ban on imports29

9.MAJOR CORPORATE NEWS30

KfW to borrow Bosnia EUR60mn for construction of Hrgud wind park30

Croatia's INA offers EUR2.15mn for remaining 33% stake in Bosnia's Energopetrol30

Bosnia probes MOL CEO over Energopetrol privatisation31

BAT-funded CID buys 39.9% of Bosnian tobacco maker FDS for EUR21.8mn32

Bosnian Energopetrol's management says INA's buyout bid acceptable34

Bosnia's opposition SDP BiH files claim against Federation's PM Novalic on sale of stake in tobacco firm FDS34

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