This report covers the main macroeconomic releases from May 5 until June 3, 2014 as well as the financial and political events that took place in Bosnia during this period.
In mid-May, Bosnia along with other Balkan countries was hit by devastating floods which will likely negative impact economic growth and inflation this year. The EBRD warned its current 2014 GDP growth forecast for Bosnia (1.8%) will likely be revised downward. The Bank estimates the damage in Bosnia at around 14% of GDP (EUR 1.3bn) while in Serbia it could reach 4-6% of GDP (EUR 1.5-2.0bn). The EU, the EBRD and the World Bank have vowed to provide financial assistance in order to help the region recover. The IMF also said it plans to double the next loan tranche that would be extended to Bosnia under its stand-by deal in order to help the authorities address their urgent financing needs in recovering from the devastating floods.
The floods have also put extra pressure on budget spending and revenue. Both of Bosnia’s entities already suffer from severe liquidity problems after the IMF financing projected in this year's budgets was delayed due to the lack of reforms. The Federation’s finance minister said in May, the entity might need to revise its 2014 budget for a second time this year to deal with shortfalls in VAT income due to the floods.
According to the statistics office, the consumer prices index fell 1.4% y/y in April, following a 1.6% y/y drop a month ago due to softer decline in food, transport and clothing and footwear costs.
The industrial production swung into a 3.3% y/y decline in April from a 1.7% y/y rise a month ago as mining and manufacturing output expanded at a weaker rate and utilities production deepened its decline.
High frequency indcators point to some recovery of private consumption in early 2014 although the unemployment rate remains structurally high at 44.5% as of end-February. The retail trade turnover increased 3.3% y/y in real terms in March 2014, quickening from a revised growth of 2.7% the month before, due to a faster rise in sales of non-food products which offset falling food, beverages and tobacco sales.
The January-April foreign trade deficit expanded by 8.5% y/y to EUR 1.10bn in the first four months of 2014 as imports grew faster than exports over the period.
Commercial banks assets increased 4.4% y/y to EUR 11.9bn at end-March, slowing from a 5.4% y/y rise the month before, mainly due to falling foreign assets whereas lending growth stagnated over the period. Bank loans, which accounted for 71% of total assets, went up 3.8% y/y to BAM 16.6bn at end-March, recording the same annual hike as the month before. Bosnia’s lending growth remains constrained by the high share of non-performing loans. The latter grew to 14.9% of total loans in the first quarter of 2014 from 13.8% a year ago, central bank data showed.
Bank deposits rose 7.1% to EUR 7.4bn at end-March 2014, slowing from a 8.8% y/y hike the month before, due to both weaker corporate and retail deposit collection.
The central bank gross foreign reserves grew 9.8% y/y to EUR 3.6bn at end-March, quickening from a 8.9% y/y hike the month before.