The coronavirus pandemic poses the most serious threat to Bosnia and Herzegovina economy since the global financial crisis, World Bank (WB) warned in its Regular Economic Report, adding that BiH will most likely fall into a deep recession with its GDP estimated to contract by 3.2 percent.
“The coronavirus pandemic poses the most serious threat to the BiH economy since the global financial crisis. The outlook is subject to significant uncertainty and BiH is confronted by the possibility of a deep recession with GDP estimated to contract by 3.2 percent. The effects will be felt in almost every sector of the economy and in particular tourism; real estate; transport; wholesale and retail sales, while disruption in supply chains and lower demand from the EU will cause declines in both manufacturing and exports of goods and services”, the report states.
It adds that the government’s response through the establishment of economic stabilization and guaranty funds can help mitigate the economic and social impact of the unprecedented crisis in the short-term.
The World Bank warned that as additional measures in response to the crisis are further developed, in particular those related to establishing the new funds, it is important to ensure that the support is transparently allocated, carefully targeted, fiscally sustainable, and easily scaled back when not needed anymore.
Following the current emergency phase, an economic recovery phase will follow and institutions will have to be ready to help individuals find jobs, facilitate access to credit and support firms to rebuild businesses, the report claims.
According to the WB, “the key will be to use public spending to boost aggregate demand while maintaining overall fiscal stability. Beyond the current crisis, it is important that BiH remains focused on addressing its long-standing structural and institutional weaknesses”.
The report for BiH comes from a much wider report on the Western Balkans region which also predicts a recession, but this time for all the Western Balkan states.
“The Western Balkans region is expected to enter a recession in 2020, with all six countries forecast to experience negative growth as they continue to grapple with the economic impacts of the COVID-19 (coronavirus) pandemic. Regional growth in the region is forecast to be between -3 and -5.6 percent”, according to the World Bank’s latest Regular Economic Report (RER) – which uses a baseline scenario and a downside scenario in the face of high uncertainty brought on by the pandemic./ibna