The Central Bank of Bosnia and Herzegovina (CBBH) sees a sharp decline in economic activity in 2020. Stagnation will be felt in every societal and financial sector, while real GDP growth above 3% is not expected in the next two years. With such moderate growth rates, restoring the pre-crisis level of economic activity is not projected before 2022 at the earliest. The previous projection of a stronger recovery in 2021 was pushed back to the end of the estimated period, primarily due to the intensity of the second wave of the pandemic, but also as a result of the weaker-than-expected effect of government spending on economic activity in the country during 2020.
“This year, it is expected that only the growth of government spending will to some extent mitigate the decline in the total economic activity, while all other components of the gross domestic product will tumble significantly. Due to unfavourable developments in the labour market, decreasing foreign remittances, reduced lending activity, and declining consumer optimism, a steep decline in personal consumption is expected in 2020. Only in the case of this component of aggregate consumption, a return to the pre-crisis level is not expected by the end of 2022. In 2021 and 2022, the importance of investments in the generation of gross domestic product is expected to grow, assuming the maintenance of the continuity of public investments. In line with real economy trends, a slow strengthening of inflationary pressures is not expected before next year,” the BiH Central Bank states in a press release.
The publication of the next round of the CBBH medium-term macroeconomic projections for the period 2021-2023 is scheduled for May 2021. In future announcements, the current projections for 2021 and 2022 may be subject to stronger revisions, in the event that the epidemiological situation does not improve by the end of the first half of next year and the negative effects on economic activities of major trading partners end up significantly worse than projected assumptions. The estimations can be adjusted upwards, if the epidemiological situation significantly improves in the country and the world due to the introduction of the vaccine as early as in the first half of the year, which would result in a faster recovery of tourism and related activities. Furthermore, projections can be adjusted to a higher level if public investments are intensified and some of the long-announced structural reforms are implemented. /ibna