Even in 2021, we will not return to the state before the epidemic

„For Bosnia and Herzegovina, we have projected a possible decline in gross domestic product (GDP) of about five percent this year. This is a serious decline and, of course, it must have consequences on the whole society”, the Governor of the Central Bank of BH, Senad Softić said in an interview for "Avaz".

He added that BH, considering everything that is happening in the world and given BH capacities, is coping relatively well with this crisis.

Statistical data

„However, it is difficult to give a precise picture of the economic situation in BH, due to the fact that statistical data are all the time late behind current trends. A few days ago, we announced from the CBBH that all budgets in BH at the consolidated level realized a surplus during 2019, of almost KM 700 million. I expect that in 2020, there could be a budget deficit, but it is difficult to say how much. It would be good to spend additionally during the crisis at all levels of the state, because this will compensate for the decline in personal consumption, and even in investments that are often postponed for some better days in such times“ - Softić explained.

He added that BH, with a public debt of about a third of GDP, is not a highly indebted country.

„We will know the trends of remittances from the data on the balance of payments in a few months, although it is quite realistic to expect their decline by about 15 percent. Data on rising unemployment rate should be of the greatest economic concern. On the other hand, according to our information and findings, the situation in the financial sector is stable, we do not see the risks of inflation. The assistance from abroad is also important to us. The EU approved initially 80 million euros and now an additional 250 million of favourable loans are being negotiated“- Softić pointed out

Speaking about the reaction of the Entities to the economic consequences of the Coronavirus, Softić says that in the first phase, both Entities responded with measures of assistance and relief for the payment of salaries in the private sector, tax deferrals and more.

“But, this time of crisis requires constant analysis of the situation, adjustment of measures, which means the improvement of already existing measures, of course, in accordance with the legal and financial possibilities”, Softić believes.

Economic recovery

He added that in 2021 there should be an economic recovery in the world, even in BH.

„That does not mean that in 2021 we will return to the level where we were before the crisis. According to our projections, we expect economic growth of 3.8 percent in 2021. However, it is evident that the virus is still spreading. According to previous statements by government representatives, there should be no complete closure of economies, as was the case in March and April this year. It is certain that part of the economic activities will not return to normal so quickly. Without optimism, there is no investment, no increase in household consumption“, Softić emphasized.

Convertible mark’s stability is unquestionable

„As for the banking sector there is no reason to worry. First, the Currency Board and the stability of the KM are unquestionable. We strictly adhere to all legal principles of the Currency Board. And the monetary stability is the main foundation for the stability of the entire financial sector. Secondly, banks in BH are highly liquid and highly capitalized, they have enough, I would say, reserves for potential difficulties to face“- Softić explained