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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 (€553.3mn). The IMF will immediately disburse around €79.2mn 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:
- CPI deflation slightly deepened to 1.2% y/y in August
- The working-day adjusted industrial production increased 7.2% y/y in June
- The foreign trade gap narrowed 3.3% y/y to BAM4.36bn (€2.23bn) in the first eight months of 2016

Table Of Contents

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

1. EXECUTIVE SUMMARY 5
2. POLITICS 6
Bosnia's government adopts SAA adjustment protocol 6
EU General Affairs Council recommends launch of application procedure for Bosnia 6
99.8% vote in favour of Republic Day holiday in Republic Srpska referendum 7
Bosnian prosecution starts investigation into Republika Srpska's banned referendum 9
President of Republika Srpska to sue Bosnian president, challenge constitutionality of Independence Day 10
Bosnia suspends chief prosecutor on suspicion of favouring Republika Srpska president 12
3. MACROECONOMIC OVERVIEW 13
IMF executive board approves €553.3mn loan deal with Bosnia 13
4. REAL SECTOR 14
4.1. GDP, forecasts 14
World Bank raises Bosnia's 2016 GDP growth forecast to 2.8% 14
4.2. Inflation 15
CPI deflation in Bosnia deepens to 1.2% y/y in August 15
4.3. Industry and trade 16
4.3.1. Industrial production 16
Bosnia's industrial production growth accelerates to 7.2% y/y in June 16
Bosnia's industrial production growth decelerates to 0.3% y/y in July 17
4.4. Labour and retail 18
4.4.1. Unemployment and wages 18
Bosnia's registered unemployment rate falls to 41.6% in June 18
Wages dip in Bosnia but rebound expected by year-end 19
4.4.2. Retail 19
Bosnia's retail sales growth accelerates to 4.9% y/y in June 19
5. EXTERNAL SECTOR AND TRADE 20
5.1. Balance of payments 20
Bosnia's Q1 current account gap expands 64.9% y/y to €183.3mn 20
5.2. Trade 21
Bosnia's 8-mo foreign trade deficit narrows 3.3% y/y 21
5.3. Foreign direct investment (FDI) 21
Bosnia's net FDI more than doubles y/y to €66.7mn in Q1 2016 21
5.4. External debt 22
Bosnia's foreign debt falls 0.2% y/y to €4.4bn at end-June 22
5.5. Foreig reserves 22
Bosnia's FX reserves grow 8.9% y/y at end-July 22
6. PUBLIC SECTOR 23
6.1. Budget 23
Bosnia's H1 consolidated budget revenue at 55% of end-year plan 23
Bosnian Republika Srpska's H1 budget revenue at 97% of plan 24
Bosnia's indirect tax revenue rises 3% y/y to €2.18bn 24
Bosnian Republika Srpska's public revenues stay flat y/y through August 25
6.2. Government debt 25
Bosnia's Republika Srpska sells out €20.5mn 7-year T-bond issue 25
Bosnia's Republika Srpska raises €7.7mn in 6-month T-bills 26
7. FINANCIAL SECTOR AND CAPITAL MARKETS 26
8.1. Banking system 26
Bosnia's M1 money supply grows 14.7% y/y at end-July 26
Bosnian bank deposits grow 7.1% y/y at end-July 27
Bosnia's bank assets grow 3.6% y/y in July 27
Share of non-performing loans in Bosnia falls to 12.1% in Q2 28
8.2. Credit ratings 29
SandP affirms Bosnia's B/B rating with stable outlook 29
8. INDUSTRY AND SECTOR NEWS 29
Bosnia formally asks Russia to lift ban on imports 29
9. MAJOR CORPORATE NEWS 30
KfW to borrow Bosnia €60mn for construction of Hrgud wind park 30
Croatia's INA offers €2.15mn for remaining 33% stake in Bosnia's Energopetrol 30
Bosnia probes MOL CEO over Energopetrol privatisation 31
BAT-funded CID buys 39.9% of Bosnian tobacco maker FDS for €21.8mn 32
Bosnian Energopetrol's management says INA's buyout bid acceptable 34
Bosnia's opposition SDP BiH files claim against Federation's PM Novalic on sale of stake in tobacco firm FDS 34

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