Boston, MA -- (SBWIRE) -- 06/13/2014 -- Core Views:

- The domestic political environment remains heavily divided along ethnic lines, stunting structural reform and weighing on the country's EU membership ambitions. Increased international pressure may push the government to approve some long-delayed reforms, but progress is set to remain slow.
- Although the preliminary estimate for 2013 real GDP growth exceeded expectations by coming in at 2.1% (subject to revisions), we maintain our forecast for 2.1% in 2014 as political uncertainty and high unemployment weigh on economic activity in this election year. Growth should accelerate to over 3% by 2016.
- Budget policy will continue to be guided by the government's Stand-By Agreement with the IMF, though budget execution will still be affected by political disputes.

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Major Forecast Changes

- We have lowered our target for annual average inflation in 2014 to 1.1%, from a previous 1.4%, after deflation continued through Q114.
- After coming in at an estimated 5.5% of GDP in 2013, we have increased our target for the current account deficit to 5.8% of GDP in 2014 (from a previous 5.6%).

Risks To Outlook

- The 2014 general election is also major source of uncertainty and risk, given the experience of 2010, when it took almost two years for coalition agreements to be settled at all levels of governments. A stalemate after the vote would further damage the country's investment climate and delay EU integration
- Political problems also pose a risk to fiscal policy, with the failure to harmonise tobacco taxes with EU norms prompting the IMF to suspend payment via its Stand-By Arrangement, jeopardising public finances in the two entities.
- Aside from political risks, the economic recovery faces underlying threats from a rising NPL ratio (to 15.1% at end-2013) and an unemployment rate that remains above 25%.

The Bosnia-Herzegovina Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Bosnia-Herzegovina and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market..

An influential new analysis of Bosnia-Herzegovina's economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

- Forecast the pace and stability of Bosnia-Herzegovina's economic and industry growth through end-2017.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.

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