The war in Ukraine, the coronavirus, reduced food imports and exports, and rising inflation, all these are the causes that affect both the European standard and the economy in Bosnia and Herzegovina (BiH). This year saw a significant jump in the prices of fuel, food such as meat, oil, and other food items, which has not been the case so far.
Economic analyst Faruk Hadzic told the rise in prices was also caused by the war in Ukraine, and the Russian attack, because in that way the global supply of products was reduced.
Raising interest rates
”Now, there will be consequences. What many countries around the world will have to do, and some have already started, is to slowly raise the level of interest rates, which at this moment, now that it has been raised, will not be enough. This will have to start at least by the end of this year and it is quite certain in this position in which we are now that there will be a global recession to reduce the level of economic activity, it is only a question of what proportion and whether and what price level we will have,” noted Hadzic.
He added that at this moment, this question cannot be answered accurately and precisely, because everything will depend on how aggressively the interest rates will be raised.
”If such a situation is really to be tamed, interest rates will have to rise significantly. The United States (U.S.) may have to create an artificial recession, but now, the answer will be quite difficult, given that many stocks and resources were spent during the coronavirus pandemic. All this will, of course, affect BiH and in a way, the advice for all these record tax collections that we have is urgently put into the function to help the economy and citizens, because a very difficult and uncertain period is coming,” he told.
The impact of the Russian invasion of Ukraine
Asked whether the ongoing war in Ukraine seems to be an excuse for all the price increases since the citizens of BiH also have domestic products and production, Hadzic said that it is difficult to answer that question.
”It is difficult to say that it is and that it is not. Actions certainly have effects in many ways. Only now the question is whether someone has increased certain costs in the same proportion. One should know that we are a small open economy that does not have enough of its own production and that in this way we can sometimes hardly influence the prices of certain products.
For example, we can influence the natural ones. When it comes to electricity, there have been no price increases, because we are the primary producer, so we control that resource. On the other hand, gas, and oil, what we do not have, we can accept prices as such, and now it is up to businessmen and, of course, the inspection to determine whether there was indeed abuse or not,”he emphasized.
Agriculture as a chance
Hadzic believes that BiH’s chance is in agriculture.
”We can help, not only produce for our needs, but also for the needs of the region. However, now there is a shortage of manpower again. We do not have enough labor force that can meet the requirements, in this case, agricultural production, and all this is what the profession has warned for years that there will be problems due to the emigration of the population, we are sweeping the problems under the rug.
Now it will be reflected in this segment as well, and we could have enough agricultural production to be able to meet at least domestic needs and in that way mitigate the significant growth of prices,” Faruk Hadzic concluded, Avaz writes.
E.Dz.
