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MACROECONOMIC INDICATORS IN BH AND BANKING SECTOR IN BH

MACROECONOMIC INDICATORS IN BH AND BANKING SECTOR IN BH. KEMAL KOZARIĆ, CENTRAL BANK OF BOSNIA AND HERZEGOVINA. Sarajevo, January 25 , 2005. Contents. Basic indicators of BH economy Banking system in BH: Commercial banking sector in BH Central bank of BH (CBBH).

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MACROECONOMIC INDICATORS IN BH AND BANKING SECTOR IN BH

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  1. MACROECONOMIC INDICATORS IN BH AND BANKING SECTOR IN BH KEMAL KOZARIĆ, CENTRAL BANK OF BOSNIA AND HERZEGOVINA Sarajevo, January 25, 2005

  2. Contents • Basic indicators of BH economy • Banking system in BH: • Commercial banking sector in BH • Central bank of BH (CBBH)

  3. Basic indicators of BH economy • According to the official data, GDP of BH in 2003 was KM 12,170 billion. If the effects of the informal sector included, according to the CBBH estimations, GDP was KM 16,770 billion. • For the period 1999-2003, average estimated rate of real GDP growth was 5, 4%, which can be considered as favorable rate, given the structural changes which BH is passing currently • The growth over the short-termed period is estimated to be 5,5%.

  4. Basic indicators of BH economy:GDP Real GDP(annual change in %) Real GDP growth projection (Source: CBBH) (Soource: PRSP)

  5. Basic indicators of BH economy:Real GDP - Comparison in the region (annual change in %) (Source: Transition Report Update, EBRD, March 2004.)

  6. Basic indicators of BH economy:Inflation • Inflation is stable and low. In November 2004, it amounted 0, 6%, representing one of the lowest inflation rate in the region. • Stability and inflation level are result of successful running of the CBBH’s monetary policy according to the principles of the Currency Board Arrangement, meaning fixed KM exchange rate pegged to euro.

  7. Basic indicators of BH economy:Inflation Inflation in BH Comparison with the inflation in the region (Source: CBBH) (Source: Transition Report Update, EBRD, March 2004, IMF Country Report No: 04/67 March 2004)

  8. Basic indicators of BH economy:Unemployment • According to the official data, unemployment rate in BH was the largest in the region and in October 2004 was 43%. However, these data should be considered with caution having in mind the estimated volume of grey economy and method of recording of unemployed, so the estimate of real unemployment rate in 2003 was 19,6%. (Source: CBBH – data on unemployment with grey economy included)

  9. Basic indicators of BH economy:Imports coverage with exports • Imports coverage with exports in December 2004, totaled to 32%. • According to indicators of the total economic activities with abroad, BH still records high foreign trade deficit, which, for the first 11 months of 2004 totalled to KM 6, 93 billion.

  10. Basic indicators of BH economy:Foreign debt and fiscal policy • Servicing of the foreign debt is carried out successfully. At the end of the third quarter of 2004, foreign debt balance was KM 4, 1 billion. Total amount of the foreign debt in the observed period is by 1, 4% higher compared to the end of 2003. • During 2004, it was continued the implementation of the accountable fiscal policy, directed to stabilization of macroeconomic situation in BH. • The Agency for Indirect Taxation has been established at the state level and activities are directed towards the delivery of legal regulations for VAT introduction. • During 2003, the fiscal balance surplus was performed for the first time and over the first six months of 2004 it amounted to KM 149 million.

  11. Basic indicators of BH economy:Fiscal balance Fiscal balance (deficit and surplus) Fiscal deficit in countries of the region (2003) (Source: Transition Report Update, EBRD, March 2004)

  12. Basic indicators of BH economy:Foreign investments • Foreign direct investment for nine months of 2004 amounted to KM 532 million, while total foreign investments amounted to KM 943 million. • Most of investments were in banking 35, 1%, manufacturing 31% and trade 11, 3% of total foreign direct investment. • Most of investments were from Austria in amount of KM 269 million, followed by Croatia with KM 79 million and Slovenia with KM 34 million. These three countries account for 72% of all direct foreign investment. • The largest recorded inflow of investments was during the second quarter.

  13. Basic indicators of BH economy:Foreign investments (Source: CBBH)

  14. Indicators of BH economy:Foreign reserves • CBBH foreign reserves have recorded constant growth. At the end of 2003 they amounted to KM 2, 781 billion. According to the CBBH data, as of November 1, 2004, the CBBH foreign reserves amounted to KM 3, 341 billion. In KM million (Source: CBBH)

  15. Banking sector: Accelerated development • Return of confidence • Savings growth • Higher level of banking services • Real competition • High level of foreign investments

  16. Banking sector: Changes • Payment systems reform • Significant increase in minimum of the banking capital • Network of banks in entire BH • Deposit insurance • State-owned banks privatization

  17. Banking sector: Capital structure * Breakup not available. ** Data from September 31, 2004.

  18. Banking sector: Credits (end of period – in KM million)

  19. Banking sector: Deposits of companies and citizens (end of period – in KM million)

  20. Banking sector: Interest rates

  21. CBBH:Achieved results • For seven years of operations, the CBBH achieved its main task, which is maintaining of monetary and financial stability in the country, including the price stability. This is achieved by consistent implementation of monetary policy through Currency Board Arrangement. • KM has become the stable currency against euro and has the full confidence of citizens. The full convertibility in BH and wider has been achieved and each KM in the circulation has the full coverage in convertible foreign currency. • Limitations of the Currency Board Arrangement: the CBBH cannot credit the government, cannot act as the lender of last resort, cannot directly fund the economic development, and the exchange rate cannot be used as the instrument adjustment of economic shocks or bad economic behavior.

  22. CBBH:Present and planned activities • The CBBH has established the Single Registry of Transaction Accounts • Preparations for transfer of the supervision over the commercial banks’ operations in BH under the umbrella of the CBBH is underway. • The CBBH is actively participating in the development of the Capital Market in the country and in preparations for the European integrations.

  23. CBBH:Foreign reserves (end of period – in KM million)

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