IMF raises Bosnia’s 2013 GDP forecast to 0.8% on higher exports, industrial output

By bne IntelliNews November 13, 2013

The International Monetary Fund (IMF) has revised up its 2013 GDP forecast for Bosnia to 0.8% from 0.5% on higher exports, industrial output and investments in the road and mining sectors, the fund said in a report on the fourth review of Bosnia stand-by deal.

Bosnia's economic growth is projected to strengthen to 2.0% in 2014, as expanding exports and large inflows of remittances will boost income and consumption, the IMF said. Higher public investments in infrastructure projects are also expected to support Bosnia’s economic activity in the near-term. Yet, the IMF cautioned that downside risks weigh on this outlook with next year’s general elections posing a significant risk to the timely implementation of policies envisaged under the program.

In 2013, growth of industrial production and sales abroad has been underpinned by a pick-up in activity in export-oriented sectors such as manufacturing and energy production, the IMF underscored. Overall, domestic demand’s contribution to the GDP growth will remain negative this year mainly due to falling private consumption, whereas public investments will have a minor positive contribution. Average inflation will slow to 1.8% from 2.0% a year earlier, reflecting constrained consumer demand. The unemployment rate is projected to stay high at around 28%.

Structural reforms aimed at making Bosnia a more attractive destination for investments will be needed to further spur growth and job creation, the report read.

The IMF also said that recently released quarterly national accounts for Bosnia confirm that the 2012 recession was more severe than initially estimated due to a weather-related slump in activity in the first quarter of the year. Bosnia’s economy thus contracted a real 1.1% in 2012, deteriorating from an initially estimated 0.7% y/y drop.

The IMF approved the fourth review under its EUR 390mn two-year agreement with Bosnia on October 28, which enabled the disbursement of a fifth tranche worth EUR 48mn. So far Bosnia has received EUR 237mn, or more than half of the funds provided under the agreement.

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