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Bosnia and Herzegovina Country Report - October, 2016

Bosnia and Herzegovina Country Report - October, 2016
This report covers the main macroeconomic releases from October 1 until October 30, 2016 as well as the financial and political events that took place in Bosnia & Herzegovina during this period.
European Union foreign ministers called on October 17 for Bosnia & Herzegovina to focus on improving the functioning of its judicial institutions and to step up the fight against terrorism and organised crime.
Milorad Dodik, the president of Bosnia’s Serb-dominated entity Republika Srpska, and the Croat representative in the Bosnian tripartite presidency, Dragan Covic, secretly support each other with the mutual aim of breaking up Bosnia & Herzegovina, former Croatian President Stjepan Mesic has claimed.
Bosnia & Herzegovina’s election body, CIK, confirmed on October 17 that Srebrenica will have its first Serb mayor since the end of the 1992-1995 Bosnian war. Mladen Grujicic, the candidate of all Serb parties in Srebrenica, won the mayoral seat in the October 2 local elections, gaining 54.38% of the votes. Bosniak candidate Camil Durakovic, who was Srebrenica’s mayor until the elections, came second with 45.45% support.
Bosnia & Herzegovina’s economy grew by 1.4% y/y in the second quarter of 2016, slowing from a revised 1.9% annual increase in the previous three months.
The Energy Community has not extended the sanctions against Bosnia & Herzegovina that were imposed last year due to the country’s failure to adopt the Second Energy Package in the gas sector, Foreign Trade Minister Mirko Sarovic said.

Key points:
CPI deflation slightly eased to 1/% y/y in September
The working-day adjusted industrial production increased by 3.6% y/y in September
The foreign trade gap narrowed 3.2% y/y to BAM4.95bn (€2.53bn) in the first nine months of 2016


1. EXECUTIVE SUMMARY 5
2. POLITICS 6
Parliament of Bosnia’s Republika Srpska makes Republic Day secular event 6
Bosnian Serb and Croat leaders to "break up Bosnia", former Croatian president claims 7
Bosnia’s Srebrenica officially gets first Serb mayor as election body issues final local election results 8
EU foreign ministers calls on Bosnia to focus on judiciary, fight against corruption 9
3. MACROECONOMIC OVERVIEW 11
IMF mission to review Bosnia's implementation of new arrangement on November 9 11
4. REAL SECTOR 11
4.1. GDP, forecasts 11
Bosnia’s GDP growth slows to 1.4% y/y in Q2 11
IMF confirms Bosnia’s 2016 GDP growth forecast at 3.0%, among lowest in region 12
4.2. Inflation 13
Bosnia’s industrial producer prices fall 0.4% y/y in September 13
CPI deflation in Bosnia cools to 1.1% y/y in September 13
4.3. Industry and trade 14
4.3.1. Industrial production 14
Bosnia’s industrial production growth accelerates to 3.6% y/y in September 14
4.4. Labour and retail 15
4.4.1. Unemployment and wages 15
Bosnia’s registered unemployment rate rises to 41.7% in August 15
Bosnia’s net wage returns to growth y/y in August 16
Bosnia to borrow $56mn from IBRD to boost employment 16
4.4.2. Retail 17
Bosnia’s retail sales growth accelerates to 7.9% y/y in August 17
5. EXTERNAL SECTOR AND TRADE 18
5.1. Balance of payments 18
Bosnia’s Q1 current account gap expands 64.9% y/y to €183.3mn 18
5.2. Trade 18
Bosnia’s 9-mo foreign trade deficit narrows 3.2% y/y 18
5.3. Foreign direct investment (FDI) 19
Bosnia’s net FDI more than doubles y/y to €66.7mn in Q1 2016 19
5.4. External debt 19
Bosnia’s foreign debt falls 0.2% y/y to €4.4bn at end-June 19
5.5. Foreig reserves 20
Bosnia’s FX reserves grow 8.8% y/y at end-August 20
6. PUBLIC SECTOR 20
6.1. Budget 20
Bosnian Federation’s 7-mo public revenues rise 11.1% y/y 20
Bosnia’s H1 consolidated budget surplus contracts 6.4% y/y 21
Bosnian Republika Srpska's public revenues inch down 0.4% y/y through September 21
Bosnia’s indirect tax revenue rises 3.11% y/y to €2.5bn 22
6.2. Government debt 22
Bosnian Federation’s foreign debt falls to €2.6bn at end-September 22
Bosnian Federation sells out €15.1mn 9-month T-bills issue at negative yield 22
Bosnia’s Republika Srpska sells €15.1mn in 6-month T-bills, above target 23
7. FINANCIAL SECTOR AND CAPITAL MARKETS 23
7.1. Banking system 23
Bosnian bank deposits grow 7.9% y/y at end-August 23
Bosnia’s bank assets grow 4.2% y/y in August 23
Bosnia’s M1 money supply grows 14.5% y/y at end-August 24
7.2. Credit ratings 24
S&P affirms Bosnia’s B/B rating with stable outlook 24
8. INDUSTRY AND SECTOR NEWS 25
Russia lifts ban on vegetable imports from Bosnia 25
Energy Community ends sanctions against Bosnia, foreign trade minister says 26
Bosnia’s Sarajevo bourse launches Islamic index 27
9. MAJOR CORPORATE NEWS 28
INA's buyout bid for remaining 33% stake in Bosnia’s Energopetrol fails 28
Bosnia criticised over emissions standards at Tuzla thermal power plant 28
Bosnia’s Aluminij signs electricity supply deal with Elektroprivreda BiH 29
Bosnian securities registry reveals buyer of Bosnalijek stake

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