A strong recovery of economy will not take place next year either - Governor Softić for Dnevni avaz 11/13/2020 Tweet Governor of the Central Bank of Bosnia and Herzegovina (CBBH) Senad Softić, in the interview for „Dnevni avaz“, said, among other things, that the new arrangement with the International Monetary Fund (IMF) would certainly include also structural reforms in BH. New arrangement Negotiations related to the new arrangement with the IMF are ahead of us. When those funds could become operating? Which conditions will be introduced for BH authorities? There is a possibility that the discussions of BH authorities with the IMF would result in a new arrangement. The authorities have already stated that they need a new arrangement, and the IMF has stated that it is ready to start new negotiations. The formal process of negotiations should start immediately after the local elections. According to the announcements of the IMF, the focus of the programme will be a BH response to the pandemic. The arrangement will certainly include also structural reforms. Which is the worst effect of the coronavirus pandemic on BH economy? It is certainly the shrinking of economic activities and the loss of jobs. There is also a fact that a part of economic activities will not resume its normal development so soon. Jobs relying, by the nature of work, on direct human contact, such as tourism and catering, will certainly feel the consequences for some time, even after the social distancing measures are ended. We are at the year end, and usually, at this time, we can summarise some economic results. What does statistics say for 2020, what has been our result? The coronavirus pandemic has brought about a decline of economies worldwide, so BH is not and cannot be an exception. There are already some indications that a decline of economic activities in 2020 could be slightly lower than initially estimated, as economic activity has started to recover in the third quarter. With the strong negative effect of the second wave of the pandemic in BH and the region becoming increasingly inevitable, we expect that the initial projections of a strong recovery in 2021 would be shifted to 2022. We expect the growth of public spending to be the only factor to mitigate the shrinking of overall economic activity, with all the other components of aggregate demand decreasing significantly. External debt grew considerably as early as in the second quarter of 2020, its growth expected to continue also in short term. Decrease of remittances Many were concerned about the decrease of remittances from foreign countries. Which are the latest indicators on the funds sent to BH by the citizens living abroad? The crisis caused by the coronavirus pandemic was expected to bring about a decrease of remittances. So, the amounts of funds sent to the home country decreased. The remittances from foreign countries are at the level of around nine per cent of GDP, having declined by around KM 213 million (around 10 per cent) during the first six months of this year. A sensitive balance between economy and health From the economic point of view, to what extent the lockdown in BH economy would be justified, taking into account the effects of the first lockdown? It is not appropriate for the CBBH to provide estimates on the adequacy of another lockdown in the economy. We are speaking about a sensitive balance between the health of the population, and loss of human lives on one hand, and economic activity on the other hand. I believe that the institutions in charge to make such a difficult decision will take into consideration all the factors.
