A Successful Investment Policy of the CBBH in the Period of Crisis

Vice Governor of the Central Bank of Bosnia and Herzegovina, Marko Vidaković, M.Sc., participated in the Central Banking Spring Meetings, held in Cape Town (The Republic of South Africa) from 5 to 6 March 2024. During the meeting, Vice Governor stressed the key perspectives and challenges which global and local economy are currently facing, firstly in respect of monetary policy.

Vice Governor Vidaković stressed that thanks to the restrictive monetary policies by the leading central banks, considerable progress was achieved in reducing inflation. He pointed out that inflation was retreating faster than anticipated and approaching pre-pandemic levels, while recession was mostly avoided in the large world economies.

Speaking of future trends, the cycle of the major central banks’ monetary policies is expected to change, with focus on gradual relaxing of the policy, with confidence that inflation is largely beaten.

Vice Governor said that the CBBH has been carefully following up with all the existing risks which may result in inflation higher than expected, stressing that global economic situation, as well as geopolitical risks still require investment policy adjustments.

Speaking of Bosnia and Herzegovina, Vice Governor stressed the local economy dependence on developments in international environment, especially in the EU and the euro area. He warned of inflation pressures which last year exceeded the years long average level in Bosnia and Herzegovina, and long lasting efforts which will be needed to stabilise inflation. In the latest projections of the CBBH, headline inflation for the first quarter of 2024 is estimated at 2.0%, and core inflation at 4.4%.

Vice Governor stressed that in 2023 the CBBH recorded its most successful financial result since the establishment of the bank, resulting from increase of interest rates and yields of euro denominated securities, but most importantly, timely restructuring of the foreign exchange reserve portfolio which was undertaken in 2022 and continued in 2023. A number of investment decisions at strategic and tactical levels were made, and the restructuring of the foreign exchange reserve portfolio was done, including a significant shortening of the average modified duration of the total foreign exchange reserve portfolio. The CBBH continues the policy of investing according to the objectives and tasks defined in the law, meaning that the official foreign exchange reserves are managed in a safe and profitable way.