Bosnia’s GDP Growth Forecast Cut to 0%

The growth forecast for Bosnia’s economy this year has been cut from 5% to 0% as the country hangs perilously on the verge of recession, experts warn.

“The situation in the manufacturing sector is not pinky at all,” the governor of Bosnia’s Central Bank Kemal Kozaric said a press conference on Wednesday.

He and other financial experts told reporters that the economic and macroeconomic situation in the country still remains relatively stable. The banking sector maintains liquidity and still has no major problem with the servicing of loans, either from citizens or from companies.

However, the effects of the global crisis are already washing over Bosnia’s manufacturing sector. With reduced demand for country’s mostly metal-oriented export, companies are already losing international contracts. As a result, industrial production is declining and unemployment increasing.

Industrial production in Bosnia’s two entities – the Bosniak (Bosnian Muslim)-Croat Federation and Republika Srpska – was last month reduced by 11.1 and 5.6 percent respectively. At the same time, the volume of commercial loans to citizens and firms has been reduced by 16 and 24 percent respectively, Kozaric said.

Bosnia’s state and entity governments have been contemplating various measures to counter rapidly the worsening economic and social situation, but experts and analysts say it is too little and too late. Plus some of the planned options, such as taking loans from commercial banks to cover budgetary gaps, were considered to be wrong.

One of the leading Bosnian economists, Fikret Causevic from Sarajevo Economic Faculty, told Balkan Insight that unless Bosnian governments undertake urgent and drastic measures, he expects “serious social pressures and political tremors” within the next few months.

Causevic and all other economic experts welcome the intention of Bosnian government to launch urgent negotiations with the International Monetary Fund, IMF, and the World Bank in order to obtain additional funds for the stability of budgets. Yet most experts fear that the current leadership is either unable or unwilling to make required reforms and curb public spending, especially on excessive social benefits to war veterans, which is a key precondition for eventual borrowing from the IMF.