Erste Bank has revised downward by one percentage point its forecast for GDP growth in Bosnia & Herzegovina this year to 2.6%, citing external trade influences and delays in public investments due to the lack of a government in office.
It is the most pessimistic independent projection so far, with Raiffeisen forecasting, in July, 2.7% a GDP advance, while also mentioning downside risks.
Notwithstanding the expected moderate growth in 2019, medium-term growth projections are supported by the projected stable private demand and accelerated investment cycle after the formation of a government, Erste commented on a more positive note.
Inflation is still benign, with a small increase projected in the second half of the year due to a rise in gas prices in May, the bank said. Consumer prices in Bosnia increased 0.3% y/y in June, slowing from the 0.8% y/y rise in May.
The trade deficit is expected to worsen slightly, reflecting the high import dependence of the economy due to the consumption-related cycle.
The fiscal position remains stable, but the political impasse hampers the potential for public investment, Erste’s report reads. Bosnia is still unable to form a ruling coalition following last October’s general election and a new government is not likely to be established at state level soon.
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