FBiH officially out of recession: Novalić should now tell citizens to spend more

By prof. dr. Dženan Đonlagić / Patria

Prime Minister of the Federal Government Fadil Novalić informs us that the Federation of Bosnia and Herzegovina has officially exited recession and that we are now in the sphere of "warming up" the economy. This is a positive statistical message from the perspective of a slight growth in real GDP in 2015 compared to 2014.

As a reminder, recessions are periodic slowdowns in a country's economic activity, accompanied by simultaneous deteriorations in the general economic climate, such as a drop in real income, rising unemployment, and low utilization of production capacities. Bosnia and Herzegovina has had an unbearably low real GDP growth rate since 2009, which is not a periodic but a continuous slowdown.

Our economy's official exit from recession does not mean that citizens will live better or have a higher standard of living. The key question is why the FBiH Government is not adopting economic measures that will positively affect the lives of all citizens? What has been done so far is below all expectations.

There are positive effects on only a few indicators, but there are still many economic indicators that have shown no significant changes in recent years, such as, first and foremost, the unbearable unemployment rate (the highest in Europe), extremely high unproductive public spending, a very low level of investment, wage levels in the real sector at the poverty threshold, meager pensions, and an already acute foreign trade deficit (a deficit of 8 billion KM in the trade balance).

In fact, the key economic trends in Bosnia and Herzegovina have been like a "flat line" for the past few years!

The consumer basket has grown twice as much as the average pension and salary in the last five to six years. The growth of the consumer basket was around 60 KM, while the average pension increased by 27 KM, and the average salary by about 23 KM. The debt per capita in Bosnia and Herzegovina is 3,000 KM and is growing year by year.

What is particularly concerning is the fact that structural reforms have remained on the margins of the reform agenda, and everything that has been done so far amounts to the continuation of the erosion of the working class.

Finally, we economists know that consumers respond to recession by changing their spending behavior, i.e., they spend more carefully. It seems to me that now, after the federal prime minister's message that we have exited recession, he should send a new message to the citizens that they can now spend more! Excuse me, just do not analytically interpret household consumption patterns that you will seek from shopping malls!