SARAJEVO, November 21 (FENA) – The International Monetary Fund (IMF) Resident Representative in Bosnia and Herzegovina (BiH), Andreas Tudyk, stated today in Sarajevo that the IMF projects economic growth in BiH to strengthen to 2.5% this year and remain at approximately 3% in the medium term.
“This growth is driven by increased private consumption and wages, along with a slight rise in investments. These figures do not yet account for the recent flood-related developments, which will likely necessitate a downward revision,” Tudyk added.
The IMF presented its report titled “Regional Economic Outlook for Europe,” which covers the latest developments, forecasts, and risks for Europe and BiH. Speaking about the section related to BiH, Tudyk highlighted several risks to the forecast, including potential slowdowns.
“There has been a renewed economic deceleration in Europe, coupled with political tensions, productivity issues, and an expansionary fiscal policy that could undermine fiscal stability,” Tudyk explained.
He noted that inflation in BiH has significantly decreased, from a peak of 17.4% in October 2022 to 0.8% currently, primarily due to a decline in food and fuel prices. Overall inflation is expected to average 2.2% in 2024 and stabilize at 2% by 2025 and in the medium term.
Regarding fiscal policy, Tudyk observed a consistent increase in social spending and public sector wages. The projected fiscal deficit is 2.2% for both 2024 and 2025. “Without corrective measures, this deficit is unlikely to decline in the future. Rising deficits and debt repayments lead to greater financing needs, which are already proving challenging to meet,” he emphasized.
In the financial sector, banks remain well-capitalized and liquid.
“Given that production is close to its potential, authorities must identify areas to reduce spending, and both entities need to be prepared to address financing requirements. Fiscal buffers need to be rebuilt, fiscal policy improved, and the currency board preserved while closely monitoring monetary risks,” Tudyk stated, summarizing the IMF’s recommendations.
A panel discussion addressed the challenges facing BiH, including insights from the economic advisor to the Prime Minister of the Federation of BiH, Goran Miraščić. Speaking to the media about the economic situation and debt, Miraščić described BiH as a moderately indebted country.
“However, when discussing debt, we must be cautious about its type. All budget-related borrowing is defined by the Budget Law and the Law on Budget Execution. The question is always whether all borrowings are fully utilized. In terms of structure, most repayments in BiH budgets are allocated to end-users. For the federal budget, these are public enterprises, particularly for infrastructure projects,” Miraščić explained.
He noted that the FBiH budget is typically used to repay existing debts, with little additional debt being created.
Regarding economic growth, Miraščić remarked that Bosnia and Herzegovina shares the fate of its largest trading partners.
“We are aware that Germany has been in stagnation for some time, possibly even recession, alongside Italy, Austria, and Hungary, which are experiencing limited growth. This negatively impacts our growth and demand for our products, as these countries account for approximately two-thirds of our exports,” Miraščić pointed out.
As a result, industrial production has slightly declined. However, Miraščić stated that growth of 2.5% to 2.8% is still expected for this year.
