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„Current Issues and Future Challenges and Perspectives of Economy of Bosnia and Herzegovina“ Kemal Kozarić, Ph.D. Governor of the Central Bank of Bosnia and Herzegovina Session 4: “The Impact of the Euro Crisis on the Financial Stability in Bosnia and Herzegovina and the Region” Workshop“The impact of Euro Crisis and Investment Opportunities in Bosnia and Herzegovina” May 11th, 2012, St Antony’s College, University of Oxford Bosnia and Herzegovina: Where are we now? Where do we want to be in the future? Potential risks along the way Chances and opportunities 2 Bosnia and Herzegovina – Where are we now? 2010 2011 2012 (projection) EUR 12.56 billion EUR 13.27 billion cca. EUR 13.70 billion 3.271 EUR 3.455 EUR Real Growth Rate 0.7% 1.6% 1.5% Industrial Production Growth Rate 1.6% 5.6% 5% Average Inflation on Annual Level 2.1% 3.7% 3.0% 27.2% 27.6 % 28% 408 EUR 417 EUR 419 EUR Foreign Debt EUR 3.19 billion (25.2 % GDP) EUR 3.39 billion (25.6 % GDP) EUR 3.73 billion (27.2 % GDP) Current Account Deficit EUR 766 million (6.3% GDP) EUR 1.14 billion (8.6% GDP) EUR 766 million (GDP 4.1%) 52.1% 54.5% 55% FDI (Estimate) EUR 173.8 million EUR 312.9 million Foreign Reserves EUR 3.301 billion EUR 3.284 billion Gross Domestic Product (GDP) GDP Per Capita BH Unemployment Rate Average Salary on BH Level Imports Coverage 3 Where do we want to be in the future? Country wide consensus on joining the European Union and Euro-Atlantic integrations European legacy and history Strong economic ties with the EU members Strong benefits from joining the large European family experienced by other countries which recently accessed to it Stability and safety net provided by joint European institutions Our goal is to try to change the perception of our country abroad and to improve level of information available on our country 4 Potential risks along the way External risks Global economic downturn, especially slowdown in our main trading partners – impact on exporters and FDI Risks of spillover in the banking sector – 84% foreign owned Changes in neighboring countries – Croatia joining the EU and impact on foreign trade (positive and negative) Internal risks Political stability – impact on perception of potential investors and on credit rating Speed of implementation of necessary structural reforms Large expansion of public expenditures in previous years endangered fiscal sustainability BH budget deficit needs to be controlled BH public debt needs to be monitored 5 Chances and opportunities There are realistic reasons for optimism, since Bosnia and Herzegovina has: 1. Skilled and educated labor with reasonable wages; 2. Large unused potential of the energy sector – only over 30% of all water resources are used up, significant potential in wind power; 3. Significant potential in the domain of organic food production; 4. Immense touristic potential; 5. Incomplete process of privatization in domains being attractive for potential investors (pharmaceuticals, telecommunication, wood industry, energy...) 6. Continuation of C5 corridor construction The most important precondition for future improvement is political stability. 6 Instead of conclusion... 7 Thank you for your attention http://www.cbbh.ba 8