BOSNIA AND HERZEGOVINA: BEFORE AND DURING THE CRISIS

Dr Fikret Čauševićfikret.causevic@efsa.unsa.ba

Regional Cooperation CouncilSarajevo, Holiday Inn Hotel, 24 February 2010

FINANCIAL SECTOR: COMMERCIAL BANKING IN BiH AS PART OF EU MARKET

BiH is already integrated into the European banking system

Most international standards relating to banking regulations are already in place in BiH

Except of integration of the two entities’ banking agencies into a single or the state-level agency

Foreign banks have contributed to the development of commercial banking in BiH – both in terms of technological improvement and by decreasing interest rates in the period 2000-2008

The year 2009 has seen an increase in average interest rates on loans to enterprises and citizens

GROSS DOMESTIC PRODUCT AND ASSETS OF THE BANKING SECTOR (millions of KM)

0

5.000

10.000

15.000

20.000

25.000

1998 2000 2002 2004 2006 2007 2008 2009

Banking Assets BiH GDP BiH

BANKING SECTOR ASSETS AND CREDITS TO ENTERPRISES AND TO HOUSEHOLDS IN

BOSNIA AND HERZEGOVINA

YearAssets of banks Credit to

enterprisesCredit to households GDP

(mill.KM)

Millons KM

In % GDP

MillionsKM

In %GDP

MillionsKM

In %GDP

2000 4,265 44.444.4 2,548 26.526.5 384 4.04.0 9,611

2002 6,345 54.554.5 2,697 23.223.2 1,456 12.512.5 11,651

2003 7,688 53.053.0 3,026 20.920.9 1,966 13.613.6 14,505

2004 9,408 59.659.6 3,178 20.120.1 2,627 16.616.6 15,786

2005 11,875 70.270.2 3,056 18.118.1 3,453 20.420.4 16,927

2006 14,700 76.976.9 4,760 24.924.9 4,480 23.423.4 19,121

2007 19,173 88.688.6 5,839 27.027.0 5,754 26.626.6 21,641

2008 20,802 84.284.2 7,322 29.629.6 6,524 26.426.4 24,720

MERCHANDISE EXPORT, IMPORT, TRADE BALANCE AND TRADE VOLUME OF BOSNIA AND HERZEGOVINA 2000-2009

- millions of KM

-15.000

-10.000

-5.000

0

5.000

10.000

15.000

20.000

25.000

2000 20001 2002 2003 2004 2005 2006 2007 2008 2009

Export Import Trade deficit Trade volume

MERCHANDISE TRADE OF BOSNIA AND HERZEGOVINA

- milions KM

YEAR Import Export Trade Balance Trade Volume

2000 2,265 6,583 - 4,318 8,848

2002 2,089 8,048 - 5,958 10,137

2004 2,819 9,306 - 6,487 12,125

2006 5,164 11,389 - 6,225 16,553

2007 5,937 13,899 - 7,962 19,836

2008 6,888 16,314 - 9,426 23,202

2009 5,530 12,348 - 6,818 17,878

CHANGES IN CREDIT ACTIVITY: THE BANKING SECTOR OF BOSNIA AND HERZEGOVINA

(millions of KM)

5.800

6.000

6.200

6.400

6.600

6.800

7.000

7.200

7.400

7.600

October 08 March 09 June 09 Sept 09 Dec 09

Credit-Enterprises Credit-Households

CHANGES IN CREDIT ACTIVITY AND TRADE DEFICIT OF BOSNIA AND HERZEGOVINA (millions of KM)

Period

Change in credit to enterprises

Change in credit to households

Change in trade balance

2004/2003 + 144 + 662 + 491

2005/2004 + 774 + 838 + 908

2006/2005 + 804 + 942 - 1.170

2007/2006 + 1,079 + 1,274 + 1,737

2008/2007 + 1,591 + 1,102 + 1,464

2009/2008 - 85 - 446 - 2,610

-3000

-2500

-2000

-1500

-1000

-500

0

500

1000

1500

2000

2004 2005 2006 2007 2008 2009

CHG-CrE CHG-CrH CHG-TD

TRADE DEFICIT, CURRENT ACCOUNT DEFICIT AND COMPETITIVENESS

OF BOSNIA AND HERZEGOVINA

Year

Trade deficit

(% GDP)

Current

Acc.def.

(% GDP)

2002 - 54.0 - 19.3

2004 - 45.6 - 16.3

2006 - 34.8 - 7.9

2008 - 38.1 - 14.9

2009 - 29.0 - 10.5

Year

Ranking in GCR

(BiH / number of countries included)

2004 81 / 104

2006 82 / 122

2007 106 / 131

2008 107 / 134

2009 109 / 133

EXTERNAL DEBTS OF SEE COUNTRIES (EBRD: Transition Report 2008)

CountryExternal debt / GDP

(in % of GDP)External debt / Exports of goods and

services

2002 2004 2007 2002 2004 2007

Albania 26.6 26.0 26.4 128.9 118.8 94.4

Bosnia and Herzegovina 58.9 50.9 48.5 253.5 173.1 116.6

Bulgaria 72.5 70.1 104.5 149.7 123.8 166.4

Croatia 61.9 80.0 88.6 136.1 161.0 181.1

FYR Macedonia 43.6 38.7 36.3 120.0 97.7 70.1

Romania 37.0 39.3 42.2 104.8 109.5 138.1

Serbia 70.6 57.8 64.0 379.3 253.7 222.4

Slovenia 55.6 62.3 108.6 85.2 97.6 143.8

EXTERNAL DEBT OF CEE COUNTRIES AND BiH (EBRD: Transition Report 2008)

Country External debt / GDP(in % of GDP)

External debt / Exports of goods and services

2002 2004 2007 2002 2004 2007

Bosnia and Herzegovina 58.9 50.9 48.5 253.5 173.1 116.6

Estonia 64.4 83.5 120.8 90.3 114.6 163.2

Hungary 55.4 69.4 98.9 87.7 107.3 123.9

Latvia 75.6 97.7 142.4 186.2 224.1 327.4

Lithuania 43.8 46.5 78.5 82.5 89.1 141.6

Poland 42.8 51.3 55.2 149.5 136.2 133.1

Russia 49.2 38.6 36.0 140.5 110.6 118.5

Slovak Republic 53.9 56.3 59.1 76.8 75.8 68.7

Slovenia 55.6 62.3 108.6 85.2 97.6 143.8

WEALTH COEFFICIENTS OF SOUTH-EAST EUROPE COUNTRIES

C O U N T R Y2007 2000 1990 2000/

1990(in %)

2007/2000(in %)

2007/1990(in %)

Albania 0.417 0.235 0.159 + 47.8 + 77.5 + 162.3

Bosnia and Herzegovina 0.491 0.279 0.643 - 56.6 + 76.0 - 23.6

Bulgaria 0.635 0.301 0.556 - 45.8 + 111.0 + 14.2

Croatia 1.403 0.784 0.912 - 14.0 + 79.0 + 53.8

FYR Macedonia 0.467 0.333 0.553 - 39.8 + 40.2 - 15.6

Romania 0.938 0.320 0.406 - 21.2 + 193.1 + 131.0

Serbia 0.688 0.236 --- --- + 191.5 ---

Slovenia 2.800 1.879 1.526 + 23.1 + 49.0 + 83.5

THE MOST PROBLEMATIC FACTORS - DOING BUSINESS IN BiH ACCORDING TO THE WORLD COMPETITIVENESS

REPORT 2009-2010

Inefficient government bureaucracy Policy instability Corruption Government instability Tax rates Crime and theft Tax regulations Access to financing Inadequate supply of infrastructure

EASE OF DOING BUSINESS IN BOSNIA AND HERZEGOVINA

DB 2010 DB 2009 DB 2008

Doing Business 116 119 105

Starting a Business 160 162 150

Construction Permits 136 137 150

Emloying Workers 111 109 114

Registering Property 139 149 144

Getting Credit 61 59 13

Protecting Investors 93 88 83

Paying Taxes 128 155 142

Trading Across Borders 63 58 53

Enforcing Contracts 124 124 126

EASE OF DOING BUSINESS IN CROATIA, SEBIA AND FYR MACEDONIA: DOING BUSINES 2010 – IBRD, WB

CROATIA SERBIA MACEDONIA

Doing Business 103 88 32

Starting a Business 101 73 6

Construction Permits 144 174 137

Emloying Workers 163 94 58

Registering Property 109 105 63

Getting Credit 61 4 43

Protecting Investors 132 73 20

Paying Taxes 39 137 26

Trading Across Borders 96 69 62

Enforcing Contracts 45 97 64