Stronger foreign demand and higher industrial output helped Bosnia post a modest growth in the first half of 2013 offsetting falling domestic demand, the government's Directorate for Economic Planning (DEP) said in its Jan-Aug report. The directorate did not give a precise estimate for the first-half GDP growth but said that the GDP contracted by an estimated 1.1% in 2012.

Exports rose 8.7% y/y in January-June, underpinned by higher sales of electricity and rising production in hydropower plants due to favorable weather conditions, DEP said.

On the other hand, declining domestic demand remained a drag on activity over the period. Private consumption continued retreating in H1, reflecting falling employment (down 0.3% y/y) and real wages (down 0.7%) as well as lower cash flows from abroad (down 3.7%). Investment activity stagnated in January-June as a 41% y/y increase of public investment in transport infrastructure was offset by falling private investment.

The report also noted that growth will likely weaken in the third quarter of the year due to slower increase of industrial production and sales abroad. The trend is confirmed by recent statistics office data. The 3-month moving average growth of exports has been deteriorating since May, falling to 2.2% in August, its lowest level since January (-0.8%). Industrial production, likewise, has been declining in monthly terms since May while its annual growth eased to 4.7% in August from 6.0% in July. According to DEP, Bosnia’s industrial output growth will likely ease further in the fourth quarter of the year reflecting high prior year base.

The Bosnian economy is projected to expand by 0.9% in 2013, DEP has said earlier. The forecast is above expectations of the IMF and the EBRD that see the growth at 0.5% and 0.1%, respectively.