* Partisan maneovring ethnic divisions and complex governing structures combine to make Bosnia-Herzegovina's political system largely dysfunctional. With few signs that radical improvements are forthcoming in even after last year's elections we expect the country to muddle through in the coming years with frustrating delays to badly-needed reforms.
* The economy has shown considerable resistance to the catastrophic floods that hit the country in summer 2014 with the downturn in growth and public finances not as severe as initially thought.
* Budget policy will continue to be guided by the government's Stand-By Agreement with the IMF - which we expect to be extended beyond June 2015 - though budget execution will still be affected by political disputes.
Full Report Details at
Major Forecast Changes
* We have adjusted our estimate for GDP growth in 2014 to 0.5% from a previous 0.2% after economic activity recovered strongly following floods.
* We have reduced our forecasts for budget deficit in 2014 and 2015 after tax revenues surprised on the upside. We estimate a shortfall of 3.5% in 2014 and target a deficit of 3.1% in 2015 (from a previous 4.2% and 4.0% respectively).
Risks To Outlook
* Political uncertainty and risk remain elevated with frequent political disputes liable to disrupt policy making and damage Bosnia's international standing.
* A sharp downturn in Bosnia's key trading partners - especially Serbia Croatia and Russia - could impact on demand for exports while headwinds in the Eurozone economy continue to pose a downside threat to growth.
* Aside from political risks the economic recovery faces underlying threats from a rising NPL ratio which hit 16.1% in Q314 and the threat of a long-term brain drain from chronic unemployment.
Report Table of Contents:
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
BMI Political Risk Index
Election Results Point To More Of The Same
Tab le: Politica l Over view
Long-Term Political Outlook
Unity To Prove Elusive Over Next Decade
Chapter 2: Economic Outlook
BMI Economic Risk Index
Economic Activity I
Regional Headwinds Further Dampen Growth Outlook
Table: Economic Activity
Economic Activity II
Unemployment To Remain High
Balance Of Payments
Wider Deficits On Weaker Regional Demand
Table: Balance Of Payments
Price Pressures To Remain Subdued in 2015
Table: Monetary Policy
Chapter 3: 10-Year Forecast
The Bosnian Economy To 2023
Political Tensions To Slow Economic Convergence
Table: Long-Term Macroeconomic Forecasts
Chapter 4: Operational Risk
Operational Risk Index
Table: Operational Risk Index
Table: Europe - Economic Openness
Table: Top Five Product Imports (USDmn)
Table: Top Five Export Trade Partners (USDmn)
Chapter 5: BMI Global Assumptions
Reality Check: Uncertainty Reigns
Table: Global Assumptions
Table: Developed States Real GDP Growth %
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS %
Table: Emerging Markets Real GDP Growth %
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