prof. dr. anto domazet influence of global economic crisis on bosnia and herzegovina panel lecture...
TRANSCRIPT
Prof. dr. Anto Domazet
Influence of global economic crisis on Bosnia and
Herzegovina
PANEL LECTUREGlobal Economic Crisis: Implications and
the Way Out for Turkey, Bosnia and Herzegovina and the Western Balkans
Sarajevo 20 October 2009
For whom the Bell Tolls ?
"No man is an island, intire of itself. Every man is a piece of the Continent, a part of the main. If a clod (piece of dirt) be washed away by the sea, Europe is the lesser... Any man's death diminishes me, because I am involved in Mankind. And therefore, never send to know for whom the bell tolls; it tolls for thee.“ (Ernest Hamingway)
„Nijedan čovjek nije otok sam za sebe; svaki čovjek je dio kontinenta, dio okeana. Ako more odnese grudu zemlje, Evrope je manje...Smrt svakoga čovjeka smanjuje tebe jer si obuhvaćen u čovječanstvu. I zato nikada ne pitaj kome zvono zvoni; tebi zvoni!" (Ernest Hemingway)
Agenda
1. What where we before recession had started
2. What is impact of recession on our economy and our lifes
3. What governments and other actors of economic activity did in meantime
4. What has to be done to overcome recession
Crisis – unknown phenomen in Bosnia and Herzegovina
Lack of research and low level of knowledge about recession and crisis in BH
No relevant analysis and estimation of future develpment of recession and crisis
Everyone would like to hear or communicate good news, but no signs of positive economic development in BH
Recession or depression – how long it will last?
GDP growth rates 2005-2014.
3,9
-3
0,5
44,5
6,9 6,85,5 6 6 6 6 6 6
-4
-2
0
2
4
6
8
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Estimated by IMF Extrapolation
Source: IMF Country Report No. 09/226, www.imf.org
Cost of recession – about 1.354 mil. KM, cost of crisis 9,4 bill. KM
Hystorical, projected and estimated dynamic of GDP (mil. KM)
16.928
19.121
21.640
23.808 23.928
24.884
26.378
27.96029.219
25.890
27.314
28.816
30.401
32.073
33.837
24.54524.545 24.545
24.545 24.545 24.545 24.545
15.000
17.000
19.000
21.000
23.000
25.000
27.000
29.000
31.000
33.000
35.000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Estimated by IMF Projection at 5,5% growth Projection 2008 level
Real sector weakenning, service sector strenghtenning its share in GDP
Structure of Gross domestic product in BH 2002.- 2007. (%)
12,5
9,6
21,619,7
5,3 5,8
24,8 24,6
6,7
15,0
29,3
25,2
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
2002 2007. 2002. 2007. 2002. 2007. 2002. 2007. 2002. 2007. 2002. 2007.
AB -Agriculture
C,E Mining& industry
F-Construction
G,H,I -Trade,
transport,
J, K-financial,business and
real estate
L-P -Publicservices
Source: www.bhas.ba
Modest results in reindustrialization of the country
Industrial production in Federation of BH Industrial production in Republika Srpska Source: Bulletin CB BH 2/09
Big decline in construction works in 2009 in F BH (-20,4%) and growth in RS (6,5%)
Construction in F BiH and RS
Source: Bulletin CB BH 2/09
Serious decline in tourism in 2009. (-7,9% total arrivals, - 13,7% total nights)
Tourist arrivals in BH (thousands)
214 220 223 217243
277 289255
161 167194
217256
306 322 308
375 388418 434
499
584611
563
0
100
200
300
400
500
600
700
2002 2003 2004 2005 2006 2007 2008 2009 est.
Domestic Foreign Total
Tourist nights in BH (in thousands)
503 505 533 533 582642 678
600
400 409 466 485594
695 719 684
903 914999 1.018
1.176
1.337 1.3951.284
0
200
400
600
800
1.000
1.200
1.400
1.600
2002 2003 2004 2005 2006 2007 2008 2009 est.Domestic Foreign Total
Source: www.zsrs.ba, www.fzs.ba
Decreasing purchaising power lowers trade distribution activity in BH
Turnover in wholesale and retailing (in mil KM)
4.470,00
3.956,70
6.669,20
5.964,60
3.099,702.490,50
4.013,903.543,503.741,30
1.600,70 1.620,601.975,40 2.199,20 2.007,90
1.620,002.057,90
5.342,00 5.164,10
5.989,30
4.110,50
5.157,60
1.000,00
2.000,00
3.000,00
4.000,00
5.000,00
6.000,00
7.000,00
2007 IV Q 2008 IQ 2008 IIQ 2008 IIIQ 2008IV 2009IQ 2009 II Q
F BH RS Total
Source: www.zsrs.ba, www.fzs.ba
Export and imports – the most sensitive indicators of recession in BH (1)
Exports to main trade areas (Thous. KM)
1.925.709
2.858.025
510.516
1.700.2182.006.623 2.415.030
2.977.0373.400.860 3.703.290
487.084 529.412 593.370
5.936.8956.711.690
5.164.3395.294.250
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
6.000.000
7.000.000
8.000.000
2006. 2007 2008 2009
CEFTA EU OTHERS TOTALSource: www.bhas.ba
Export and imports – the most sensitive indicators of recession in BH (2)
Imports from main trade areas (Mil. KM)
5.898.900
12.028.920
5.653.430 3.929.255 4.702.625
3.205.830
5.360.4076.642.380
7.814.757
3.327.0742.924.1303.768.6742.893.097,35
13.906.934 13.898.70916.286.056
0
2.000.000
4.000.000
6.000.000
8.000.000
10.000.000
12.000.000
14.000.000
16.000.000
18.000.000
2006 2007 2008 2009
CEFTA EU OTHERS TOTALSource: www.bhas.ba
Estimated unemployment due the recession 25-35.000 persons
Source: Bulletin CB BH
BH - losing competitiveness capacity for mid-term growth
Position of BH in global competitiveness 2008 2009
4,15
3,99
4,42 4,69
4,52
3,93
3,89
3,42
3,44
3,95
4,083,58
3,48
3,82
3,703,16
2,83
3,302,74
2,80
3,33
3,90
3,75
3,874,22
4,11
3,56
3,55
0
1
2
3
4
5
Albania
BH
Montenegro
CroatiaMacedonia
Moldova
Serbia
Basic requirements
Efficiency enhancers
Innovation factors
Overall score
Source: Global Competitiveness Report 2009, www.weforum.com
Key macroeconomic indicators -projecting higher debt and lower CAB deficit
Average decrease of revenue of 10% - clear sign of recession in BH
State and entities revenue (2006-2009) in mil. KM
5248,4
4.766,804.409,50
2.794,50
349,20
4713,2
5.339,0 5.702,0
4348,3
4.902,55.273,2
4.676,0 4.924,3
4104,7
2448,82.868,6
3.119,5
919,2861,6 939,61.006,70
651,7557,8655,6
0
1000
2000
3000
4000
5000
6000
2006 2007 2008 2009*Current Revenues Taxes Indirect taxes
VAT Excises Customs duties
* * estimated, source VAT Directorate, www.oma.ba
Recovering money supply but still not favorable conditions of credits
Money supply VI 2008-VIII 2009 (mil. KM)
5.000,00
6.000,00
7.000,00
8.000,00
9.000,00
10.000,00
11.000,00
12.000,00
13.000,00
14.000,00
06. 07. 08. 09. 10. 11. 12. 01. 02. 03. 04. 05. 06. 07. 08.
2008. 2008. 2008. 2008. 2008. 2008. 2008. 2009. 2009. 2009. 2009. 2009. 2009. 2009. 2009.
M1 QM M2
13.37012.380 13.370
6.2425.528 5.704
6.9217.174
6.651
Lower claims becouse of higher credit risks and higher interest rates
Banks claims on non-government sector in BH (Mil. KM)
6.000,00
7.000,00
8.000,00
9.000,00
10.000,00
11.000,00
12.000,00
13.000,00
14.000,00
15.000,00
06. 07. 08. 09. 10. 11. 12. 01. 02. 03. 04. 05. 06. 07. 08.
2008. 2008. 2008. 2008. 2008. 2008. 2008. 2009. 2009. 2009. 2009. 2009. 2009. 2009. 2009.
Claims from private companies Claims from housholds TOTAL Claims
14.60814.164
13.734
6.237 6.7356.290
6.404 6.791 6.458
Monetization of BH economy – money supplay grows faster than real economy (GDP)
Source: Central Bank of BH
Monetary agregates as % of GDP
39,5 40,9
46,551,1
56,2 56,151,4 52,6
23,4 23,2 24,1 2628,2 28,3
24,2
18,618,115,6
27,2 28,8
19.1
28,225,122,1
0
10
20
30
40
50
60
2002 2003 2004 2005 2006 2007 2008 I-VII 2009
M2 M1 MQ
BH entered recession as neglected society and economy with old fashioned politics
BH economy was overheat in 2008, with consumption-lead growth, based on high credit and fiscal expansion
Low competitiveness and lack of political will to start structural reforms in social and economic field on the EU way, needed to activate potentail sources of development
The main consequences of recession are: a) drop in GDP, fiscal revenue, public, household and investments consumption and external sector activities (export, import, FDI, tourism, remittances), b) losses of working places, c) credit contraction and more expansive money, d) bankruptcies
More intensive social tensions – higher risk of poverty
Global recession and Made in BH attributes (magic triangle of BH reality)
Ekonomija
Socijalna sfera
Politička struktura
Global recession
EU Regional impactBH reality Economy
Social Political
sphere sphere
Main challenges of BH development
Political consensus about future of the country and its political organization
Growth of competitiveness based on efficiency driven stage of development
Improve the governance in global unstability and recession
Increase the level of investments and employment – to mobilize potential sources of development
To speed up economic, spocial and political reforms and integration in EU – to reach status of candidate for membership
Fighting corruption and organized crime Building up strong state and market institutions
The question of sustainability– there is need for new politics for better economy and fair social system
POLITICSBH as a functional state
EU and global integrationRules of low
Fighting corruption and organized crime
Private vs public sectorsMarket regulation Market institutions
SOCIAL SECTORSocial state and security
Equal chances for allImprove education and health
Reforming tax and social benefits systemReforming pension system
Fighting povertyImprove labor regulation
Social care for children and old people
ECONOMYMacroeconomic stability - SESImprove business environemnt
Attract domestic and foreign inv.R&D and Support competitiveness
Openning new working placesSupport SMEs and farmersPrivete public partnership
Export – lead growth
What have governments done – trying to save themselves or to help to the others
Intensity of govenment engagement to confront with crisis
1
3
2
6
5
4
4
5
73
11
7
2
01234567
Expenditure reduction
Tax increasing
IndebtednessSocial support
Support to business
Serbia
Croatia
BH
Fire faighting in line with systematic approach to structural and sectoral reforms
(Supply side vs demand side approach)
Supply side Demand side
Reforming economy
Reducing taxes
Supplying money under favorable conditions (RB)
Privatization to activate business/improve performances
Supporting education
Promoting entrepreneuership
Investing in business infrastructure (business parks
Deeper integration in EU
Better access to credits for households
Public investments
Subsidies for working places
Increasing public consump-tion by increasing taxes
Selecting VAT rates
Requisition of property gained by crime
Is recovery natural phenomen?(More realistic approach – to combine internal
efforts with global recovery)
2.
Good expectationsRisk of the growth
1.
WinnersRecovery and fast
growth
3.
LosersNo recovery – long-term
depression and crisis
4.
Bad expectationsRecovery in long-term
period
High
SUCCESSOF REFORMS
Weak Slow GLOBALNI RECOVERY Fast
Thank you for your attention.