May 25 (SeeNews) - The International Monetary Fund (IMF) said it expects Bosnia and Herzegovina's economy to expand 2% this year, keeping unchanged its growth forecast made in April.
Bosnia's economy is slowing, while inflation, despite showing a decrease, continues to stay elevated, the IMF said earlier this week in a staff concluding statement following an Article IV mission.
Average inflation is projected to fall to 6% in 2023, in line with falling international food and energy prices, after peaking at 17.4% year-on-year in October.
"Downside risks are high and include a possible abrupt slowdown in Europe, an intensification of domestic political tensions, and the materialization of financial risks," the IMF said.
The IMF mission called for implementing measures to combat inflation, including a less expansionary fiscal policy, higher interest rates, and steps to maintain financial stability, emphasizing the need for fiscal policy to control spending and support growth-enhancing public investments.
Bosnia's central bank was urged to align interest rates with the euro area and ensure accurate assessment of credit risk. However, calls to finance entity budgets or provide credit to banks or the broader private sector were discouraged.
The IMF mission also advised authorities to prioritise implementing reforms to boost growth driven by the private sector, such as enhancing oversight and governance of public enterprises, improving the business climate, and promoting digitalization in the economy.
"The authorities should also enhance corruption prevention and enforcement efforts. An immediate priority is to adopt a new anti-money laundering law," the IMF added.
Furthermore, proactive measures are necessary to prepare for the implementation of the European Union's Carbon Border Adjustment Mechanism and facilitate the transition from coal to renewable energy sources, the global lender concluded.