Bosnia might enter recession as of September c-banker.

By bne IntelliNews August 13, 2012
Bosnian c-bank governor Kemal Kozaric said the country might enter into recession as of September if the current negative macroeconomic trends persist, news agency Srna reported. Kozaric said that six-month data indicate Bosnias industrial production dropped 6.7%, imports fell 5.1% and exports shrank 0.7% in Jan-Jun, which resulted in a trade gap of BAM 3.4bn (EUR 1.74bn) and a BAM 400mn drop in the foreign exchange reserves. At present, these results have been smoothened by the tourism season as indicators show the current amount of money in circulation is at highest level, Kozaric said. He expressed concern over the situation in the agriculture sector, which has been hit by the recent drought, and over the uncompetitiveness of the domestic products. According to him, the country might import inflation if global food prices rise as in the previous year when Bosnias inflation was 3% due to oil prices. The IMF agreement is just a by-pass - without new investments and new jobs we will remain in the incumbent state, Kozaric said. He added that the lack of political stability furthermore complicates Bosnias ability to implement reforms. Last month, the IMF said it agreed a 24-month funding deal worth some USD 500mn with Bosnia, which is a subject to approval by its executive board in September. Until then, Bosnia is expected to implement a number of agreed measures as part of the IMF-supported economic programme, including budget revisions in Bosnias two entities the Serb Republic and the Federation. The Bosnian economy expanded by 1.26% in real terms in 2011 thanks to trade, manufacturing, public administration and real estate after rising only 0.7% in 2010. The EBRD cut its 2012 economic growth forecast for Bosnia to 0.3% in July from 0.4% made earlier in May. It said that although the countrys economy has been rather stable in the past couple of years, the domestic consumption remained weak due to falling remittances and fiscal austerity. Bosnias overall economic outlook stays weak despite the fact that some of the weakness could be compensated by a continuous strong demand for certain export items such as metals and timber in the short term, the EBRD has said.

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