CBBH Projections: Economic Recovery in BiH in 2022

SARAJEVO, (Patria) - The Central Bank of Bosnia and Herzegovina is publishing the second round of projections of key macroeconomic aggregates for the period 2020 – 2022. Projections may be revised upwards if the epidemiological situation, due to the discovery of a vaccine, significantly improves in the country and the world, as early as the first half of the year, which would result in a faster recovery of tourism and related activities. Also, projections may be revised upwards if public investments intensify and some of the long-announced structural reforms are implemented.

The Central Bank of Bosnia and Herzegovina (CBBH) expects a sharp decline in economic activity in 2020. Stagnation will be felt in all sectors of society and the economy, and in the next two years, real GDP growth is not expected to exceed 3%. With such moderate growth rates, reaching the pre-crisis level of economic activity is expected at the earliest in 2022. The previous projection of a stronger recovery in 2021 has been postponed to the end of the projection period, primarily due to the intensity of the second wave of the pandemic, but also due to the weaker-than-expected effect of government spending on economic activity in the country during 2020. The table shows the values of medium-term projections of key macroeconomic aggregates produced by the CBBH Chief Economist's Office.

In the current year, only the growth of government spending is expected to somewhat mitigate the decline in overall economic activity, while all other components of gross domestic product will record a significant decrease. Due to unfavorable labor market trends, a decline in remittances, reduced credit activity, and decreased consumer optimism, a sharp decline in personal consumption is expected in 2020. Only for this component of aggregate demand is a return to the pre-crisis level not expected by the end of 2022. In 2021 and 2022, an increase in the importance of investments in generating gross domestic product is expected, assuming the continuity of public investments. In line with trends in the real economy, a milder strengthening of inflationary pressures is not expected until next year.

The publication of the next round of medium-term macroeconomic projections by the CBBH for the period 2021 – 2023 is planned for May 2021. In subsequent publications, current projections for 2021 and 2022 may be subject to stronger revisions if the epidemiological situation does not improve by the end of the first half of next year and if the negative effects on economic activity in the main trading partners are significantly worse than our projection assumptions. Projections may be revised upwards if the epidemiological situation, due to the discovery of a vaccine, significantly improves in the country and the world, as early as the first half of the year, which would result in a faster recovery of tourism and related activities. Also, projections may be revised upwards if public investments intensify and some of the long-announced structural reforms are implemented.