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„ Macroeconomic Context and New Strategy of Competitiveness “

„ Macroeconomic Context and New Strategy of Competitiveness “. Kemal Kozari ć, Ph.D. Governor of the Central Bank of Bosnia and Herzegovina The 2012 SEE Management Forum , Beograd, 19 September 2012. Bosnia and Herzegovina – Current Situation. 2. Potential Risks in Development . 3.

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„ Macroeconomic Context and New Strategy of Competitiveness “

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  1. „Macroeconomic Context and New Strategy of Competitiveness“ KemalKozarić, Ph.D. Governor of the Central Bank of Bosnia and Herzegovina The 2012 SEE Management Forum, Beograd, 19 September 2012

  2. Bosnia and Herzegovina – Current Situation 2

  3. Potential Risks in Development 3

  4. Consolidated Budgets of Western Balkans Countries • 1 % GDP Source: EBRD, Transition Report 2009 and 2012. Percentages for 2010 are “estimates”, and those for 2011 are “projections”

  5. Total Budget Spending in the Western Balkans Countries % GDP Source: International Monetary Fund, World Economic Outlook Database, April 2012, the data for 2011 are estimated

  6. Increase of Public Debt in the Balkans Countries • . Data on public debts of countries of Western Balkans are from the web site of the International Monetary Fund by countries (www.imf.org – „Country Info“)

  7. Public Debt in Euro Zone

  8. Changes in Lending Activities in the Western Balkans Countries

  9. Increase of Bad Loans The data are shown in percents. Source: ECFIN

  10. Unemployment in the Region • 1 Source: ECFIN, except for unemployment in BH

  11. Trading in the CEFTA Region in 000 euro; Source CEFTA, http://www.cefta2006.com

  12. Decrease of Economic Activities in Countries Partners • 1

  13. The Structure of the FinancialSector in BH • A high percentage of foreign ownership is a potential risk because strategic decisions are made outside the reach of the monetary authorities of Bosnia and Herzegovina. • Rather small share of other financial intermediaries • Table: Value of property of financial intermediaries. 13

  14. Banking Sector in BH • “Bank-centric” financial sector: • 84% of the total assets of the financial sector (end 2010). • The dominance of foreign banking groups • 95% of total assets and 82% of equity is concentrated in banks with majority foreign ownership • The significance of "Vienna Initiative" (external debt of the banking sector - 29.5% of total liabilities) 14

  15. The MainRisks for the BankingSector in BH (and the Region)? • The possibility of spill-over of the crisis from home countries of foreign banking groups and the EU • Procyclicality of the financial crisis to other segments of the financial sector - micro-credit organizations, leasing companies, capital market and insurance companies • The efficiency of supervision (cross-border cooperation) • Corporate governance in banks, with emphasis on the improvement of relations with clients • Exposure in the region – significance of home-host supervisory framework 15

  16. The MainRisks for the BankingSector in BH (and the Region)? • After the decrease of the level of savings during the crisis, return of confidence and increase in household savings (14% in 2010, 10% in 2011) • A slight increase in lending activity (about 3% in 2010, about 4% in 2011) • The results of stress tests (for now, the banking system is well capitalized and resistant to shocks) • Financial and banking sector have shown a remarkable level of resilience to the financial crisis. 16

  17. Future Challenges for the RealSector • With purpose of the economy achieving the desired recovery, it is necessary to: • support domestic production, especially exporters; • work on the increase of domestic goods consumption; • work on the development of unused potentials in the energy sector; • develop significant potentials in the domain of food production; • work on restoring and building of new touristic capacities; • continue the privatization process; • work on developing of the competitiveness of the state and the elimination of administrative barriers for investors. • The most important precondition for the achievement of any of the above mentioned objectives is political stability.

  18. Region Potentials • The countries in the region face the shortage of sources of financing more and more frequently • Increasing pressures of local and international factors for introduction of savings measures at all levels • Main issue is how to save without jeopardizing competitiveness? • Usage of local resources (energy production, food production, tourism) • Stronger regional cooperation and joint activities at the third markets • Political stability of the region and Euro-Atlantic integration

  19. Thank you for your attention! http://www.cbbh.ba 19 19

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