The World Bank expects the economic growth of Bosnia and Herzegovina of four percent in 2022, but domestic and external risks are still present, it was pointed out today in Sarajevo during the presentation of the Regular Economic Report of the World Bank for the countries of the Western Balkans.
The report was presented by the head of the World Bank office in BiH and Montenegro, Christopher Sheldon, and the senior economist of the World Bank in BiH, Sandra Hlivnjak, who stated that the economic performance of all six Western Balkan economies is still under the influence of the war in Ukraine and the consequent sharp increase in energy prices and global growth slowdown.
“Even though the growth in the first half of this year easily exceeded the expectations for BiH, it is clear that the present shocks on the market can affect the prospects for the country in the medium term. The outlook in the region is affected by a combination of shocks. BiH’s strong ties with the region and stricter global financing conditions, as well as the expected slowdown in both domestic and foreign demand, will also have an impact on the prospects for BiH,” stated Sheldon.
Economic growth, led by consumption and investments in the first half of this year, as Hlivnjak said, proved to be strong, exceeding expectations.
“In Bosnia and Herzegovina, as in all other countries of the Western Balkans, growth has been recorded. In 2021, that growth surprised us all and reached 7.5 percent according to the data of the BiH Agency for Statistics (BHAS). Growth continued in the first quarter (5.8 percent) and the second quarter (5.9 percent) of this year,” Hlivnjak added.
When looking at the situation regarding consumption, as she stated, it is not a long-term sustainable model for BiH because the increase in consumption does not create additional value and cannot create new jobs and have a more productive impact on the progress of an economy. She emphasized that there was an increase in employment in all countries of the region, including in BiH.
“What is problematic and what worries us all at the World Bank, but I assume also every household in Bosnia and Herzegovina, is the continued growth of inflation, which is mainly of an imported nature. The trade deficit is deepening due to increased imports, exports are also increasing, but this dominance of imports is so significant that in the net statement the trade deficit is still large and it contributes to the increase in the current account deficit,” Hlivnjak added.
She emphasized that growth will continue in the coming period and that for 2022, due to the slowing growth factors, the expectation is that it will be around four percent, which, as she said, is certainly good, but not enough to significantly initiate stronger structural reforms. In the medium-term period, the continuation of growth is also expected, however on some lower bases that are also subject to risks, therefore, it is possible that there will be a further revision of that growth depending on how the risks will manifest themselves.
“When it comes to domestic risks, among them is increased political uncertainty and poor implementation of reforms, while foreign risks, among other things, refer to the presence of war in Ukraine and geopolitical tensions,” said Hlivnjak.
