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Bosnia and Herzegovina Report - December, 2014

This report covers the main macroeconomic releases from December 6, 2014 until January 5, 2015 as well as the financial and political events that took place in Bosnia during this period.
The International Monetary Fund (IMF) said that Bosnia’s economic outlook remains uncertain due to the limited donors support.
Meanwhile, the European Commission will provide Bosnia additional €41mn to help the country recover from severe floods in May. The funds should be used for housing rehabilitation, SMEs and local economic development in flood affected areas.
The country’s bigger entity, the Federation, said its GDP swung to a 0.4% y/y growth in the third quarter of 2014 from a revised contraction of 0.5% y/y in the previous quarter. On the other hand, the Serb Republic’s economy contracted a real 0.1% y/y in the third quarter of 2014, narrowing from a revised decline of 1.3% y/y in the previous three months.
The Serb Republic has approved the new government following the October 12 elections. The candidate of the leading party in the Serb Republic – the Alliance of Independent Social Democrats (SNSD) – Zeljka Cvijanovic, remains the Prime Minister for a second term.
On the corporative front, China’s state-owned Eximbank and Bosnia’s Federation government have signed an agreement for a €667.8mn credit to be used for the construction of the 450MW unit 7 at the thermal power plant Tuzla.

Key points:
• Federation’s CPI increased by 0.3% y/y in November, the same as the month before.
• The Federation’s dropped by 1.5% y/y in November, narrowing from a 1.8% annual decrease in October. Serb Republic’s industrial output increased by 2.1% y/y in November, decelerating from a 6.6% y/y growth in October.
• Bosnia’s central bank gross foreign reserves rose 11% y/y to BAM7.644bn (€3.911bn) at end-October 2014, easing from 12.1% y/y hike at end-September


EXECUTIVE SUMMARY 4
Bosnia’s Serb Republic parliament approves new govt led by Zeljka Cvijanovic 5
EU to provide Bosnia €41mn for recovery from floods 5
IMF says Bosnia’s economic outlook remains uncertain, to decide on loan tranche in Jan 2015 6
Bosnia to receive two IMF loan tranches by Feb-2015 if meets criteria – Federation’s FinMin Krajina 6
REAL SECTOR 7
1. GDP 7
Bosnia’s Federation GDP rises 0.4% y/y in Q3 7
Bosnia’s Serb Republic GDP contracts 0.1% y/y in Q3 7
2.Inflation 8
Bosnia’s Federation industrial PPI inches up 0.2% y/y in November 8
Bosnia’s Federation CPI holds at 0.3% y/y in November 8
2. Industry and Trade 9
Bosnia's Federation industrial production down 1.5% y/y in November 9
Bosnia’s Serb Republic industrial production up 2.1% y/y in November 9
Bosnia’s Serb Republic retail trade turnover up 14.7% y/y in November 10
Bosnia’s Federation foreign trade deficit at €186.2mn in November 10
Bosnia’s Serb Republic foreign trade deficit at €1bn in Jan-Nov 10
4. Tourism 11
Bosnia’s Serb Republic tourist arrivals rise 2.6% y/y in Jan-Nov 11
5. Labour Market 11
Bosnia’s registered unemployment rate edges down to 43.6% in October 11
Bosnia’s Federation number of employed persons up 2.8% y/y in October 11
Bosnia’s average net wage edges up 0.1% y/y to €426 in October 12
Bosnia’s Federation average net wage falls 0.8% y/y in October 12
Bosnia’s Serb Republic average net wage up 1.9% y/y to €423 in November 12
FISCAL SECTOR, MONETARY POLICY 12
Bosnia approves €121.2mn temporary state financing for January-March 2015 12
Bosnia’s FX reserves rise 11% y/y at end-October 13
Bosnia’s M1 money supply growth cools to 8.4% y/y at end-Oct 13
Bosnia’s Federation 9-mo budget surplus increases to €148mn 13
Bosnia’s Serb Republic government endorses 2015 budget draft 14
Bosnia's Serb Republic raises €7.6mn from three-month T-bills, yield drops 14
Bosnia's Serb Republic fails to sell €7.7mn in T-bills on low demand 15
FINANCIAL INTERMEDIATION 15
Bosnia’s bank assets growth slows to 4.5% y/y at end-November 15
Bosnia’s Federation 9-mo banking system profit at €63.4mn 15
Bosnia’s bank deposits increase 8.6% y/y to BAM15.26bn at end-November 15
STRUCTURAL REFORMS, CORPORATE PLANS 16
China’s Eximbank to lend €667.8mn to Bosnia for 450MW thermal power project 16

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