SARAJEVO (Bosnia and Herzegovina), December 23 (SeeNews) – Bosnia’s central bank governor Kemal Kozaric expects the country's economy to contract by 3.0% this year before turning to 0.5% growth in 2010, local media reported on Wednesday.
“Our forecasts are that next year also will be complicated and hard for Bosnia,” news portal www.capital.ba quoted Kozaric as saying.
He added Bosnia’s recovery from the global crisis will be slow and the economy will grow by 3.0% in 2011.
This year’s contraction was caused mainly by a 22% drop in exports and a 26% fall in imports, Kozaric said.
“Besides, we have 35,000 jobs less, a 20% drop in remittances compared to 2008, foreign direct investment in a drastic fall, as well as the political risk.”
A political deadlock among Bosnia’s top leaders representing its three main ethnic groups - Bosnian Muslims, Serbs and Croats, has stalled political, legislative and economic reforms, blocking the country’s path to membership of the European Union.
Bosnia consists of a Muslim-Croat Federation, a Serb Republic and a neutral Brcko District, formed by the 1995 Dayton Peace Agreement which put an end to the ethnic war in the Balkan country. Each of the regions has its own government and all are linked with a weak central government.
Kozaric said Bosnian commercial banks’ profit slumped 42% this year due to rise in the share of bad loans to 2.8% of total assets. He sees consumer price inflation at 1.4% this year and at no more than 2.0% in 2010.
In July, the IMF approved a 36-month $1.52 billion (1.1 billion euro) stand-by loan for Bosnia to help the country mitigate the adverse effects of the global financial crisis.
Bosnia’s public debt totalled around 2.0 billion euro prior to the signing of the funding arrangement with the IMF. The loan will increase the country's public debt to around 3.2 billion euro, equivalent to 40% of GDP, making Bosnia a moderately indebted country, Kozaric said.
Bosnia’s 2009 GDP is projected at between 24 and 25 billion marka ($17-$18 billion/12-13 billion euro).
The IMF delayed last month the disbursment of the second tranche of the loan of around $140 million until the middle of January, saying the country must contain public spending within the limits set for 2009. Bosnia already received one tranche of $282.37 million to cover the budget deficits of the Serb Republic and the Federation.
“The second tranche is also for budget support, the third one is for capital investments, while the fourth and the fifth one will be used to support the central bank foreign reserves, which are stable and are worth 6.1 billion marka,” Kozaric said.
(1 euro=1.95583 marka)