Bosnia’s 2013 growth outlook remains one of the weakest in the SEE region according to the latest forecast of the IMF and the EBRD. The EBRD reduced Bosnia’s 2013 GDP growth forecast to 0.1% in the May edition of its Regional Economic Prospects report from 0.6% in January. The outlook is broadly in line with the IMF forecast of 0.5% GDP growth for Bosnia this year. However, it is less optimistic than the latest central bank’s projection of 1.0% GDP expansion in 2013, based on modest recovery of industrial output and exports.

Furthermore, the European Union – Bosnia’s single largest donator, warned it might freeze hundreds of millions euro worth of new support to the Balkan country because of it continue to fail in implementing reforms necessary to unblock its accession process. On a more positive note, the country received the third loan tranche under its 24-month EUR 390mn loan deal with the IMF after the Federation’s parliement approved in early April the law on priviledged pensions.

On the economic front, consumer prices in the country eased to 0.6% year on year in March from 1.0% in February due mainly to a slower food price growth and shrinking transport costs. The industrial output rose 7.6% year on year in March, supported by still strong manufacturing and utilities output.

Bosnia’s jobless rate inched up to 46.1% at end-February from 46.0% a month earlier and 44.5% at end-2012, according to the country’s labour and employment agency.
The foreign trade gap narrowed 9.3% year on year to EUR 763mn in January-March due to a strong exports increase which offset a much milder imports growth.

Bosnia’s commercial bank assets rose 3.9% year on year to an aggregate EUR 11.4bn at end-Q1 (83.4% of GDP). Domestic loans, which represent the majority of bank assets, increased 3.6% year on year to EUR 8.2bn at end-March while Bosnia’s deposits rose 5.6% to EUR 6.9bn over the period. March’s loan growth has been mainly driven by corporate lending. On the other hand, the annual deposit growth was underpinned by corporate deposits for the first time since February 2011, likely reflecting some improvement in the sector’s activity and income.

The gross foreign reserves managed by Bosnia’s central bank increased 3.5% year on year to EUR 3.2bn at end-March, comprising 23.6% of the forecast GDP. End-March’s net foreign reserves (at EUR 3.24bn) of Bosnia’s central bank continued to fully cover its monetary liabilities, thus guaranteeing the stability of the currency board arrangement. The level of this coverage stood at 108.9% at end-March, slightly down from 109.2% the year before.