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B&H Watch: Slight GDP uptick in Q3
Owing to strong investments (+8.7% yoy), stable consumption (+2.3% yoy) and stabilized exports (+0.1% yoy), GDP growth in B&H accelerated by 2.6% yoy in Q3 2024 which is the best quarterly result in 2024. Floods may weigh on Q4 results, while faster growth is expected for 2025.
Investments as player from the shadow!
The most dynamic segment of the B&H economy in 2024 was gross fixed capital formation (investments) which reported remarkable growth rates in all quarters in 2024 (Q1: +48.2% yoy, Q2: +9.6% yoy, Q3: +8.7% yoy). This reflects positive momentum in domestic economic activities and the expectation of recovery in foreign trade. In that context, investments contributed the most to total GDP growth, with 2.5 pp in Q3 2024. Continued positive development is expected in the short term based on the stabilization of exports and rising domestic consumption.
The second largest positive impact on GDP growth came from the private consumption side with an increase of +2.3% yoy and a share of 59% in total GDP value. Key factors behind the increase of private consumption are: robust real wage growth (+8.4% yoy avg net nominal wages), and a higher level of private lending in Q3 2023 (+9.4% yoy). Public consumption increased by +2.4% yoy but its share in total GDP was substantially lower (17%).
After five consecutive quarters with a negative growth rate, exports of goods and services finally stabilized in Q3 2024 with a negligible growth of +0.1% yoy. At the same time, it is an important result for the domestic economy keeping in mind that the first two quarters of 2024 were marked by negative net exports. After Q3 2024, it seems that external demand has slightly recovered in the EU and CEFTA countries and the outlook in a short time should be coloured by continued but moderate recovery. On the other side, imports continued to increase (+2.6% yoy) which is still a dragging factor for B&H GDP results.
Production side highlighted again good diversification of domestic economy
In Q3 2024 almost all segments reported positive rates, except industrial production and agriculture. The largest positive momentum came from the service segment, especially from the accommodation and food services with growth of +16.5% yoy as a result of tourism. These trends are followed by a positive development in the IT segment (+7.8% yoy), construction (+7.2% yoy), administrative services (+7.2% yoy), trade (retail ad wholesale) (+6.5% yoy) and transport (+5.9%) segments. This clearly indicates that the domestic economy has a wide base of growing segments and a strong level of diversification.
On the other side, industrial production - still the largest category of GDP - was weak in 2024 (the trend of negative rates in Q1 and Q2 continued in Q3 with -6.6% yoy) and it was mainly the consequence of lower electricity production.
Based on our forecast, the last quarter in 2024 should bring a slightly lower level of growth in comparison with Q3 (up to 1.9% yoy), keeping in mind local flood effects and interruption of the most important railway line to Port Ploče via which exporters were sending the goods to the EU. However, we expect stable private consumption increase (wages, remittances, private sector lending, tourism, festive season), and a continuation of investment growth. It should be sufficient for positive overall GDP growth for 2024 by +2.3% yoy, despite all negative flood effects and trends within industrial production. At the same time, we expect additional acceleration of the GDP dynamic in 2025 (+2.7% yoy) on the wings of expected EA and regional economic momentum.
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Ivona ZAMETICA
Bosnia Herzegovina Ivona Zametica has established B&H Research Team within Raiffeisen BANK d.d. Bosnia and Herzegovina back in March 2010. She graduated at Economic Faculty of Zagreb in Macroeconomics and Finance and further deepened her knowledge through the Master degree program in Advanced Financial Management and Markets. She has been among top 3 forecasters for economic indicators of B&H in Focus Economics pool in the past four years and granted the award as the best overall forecaster for 2021. She has been further deepening her knowledge about the Financial Markets and Investment Banking in several projects and transactions of the Bank and being part of the Working Group supporting establishing the local DCM market in B&H. She has been also author of several research papers and studies related to currency board in B&H, government debt management and access to finance of SME’s in B&H. Apart from current coverage of B&H market and interest in SEE and CEE region, she has been particularly interested in monetary policy and recent technological impacts on future of monetary policy and currencies. Ivona is passionate yoga practitioner while in the free time she enjoys the most with her family and friends in travelling, hiking while dancing, theater and music are her passions from the childhood which she shares now with her daughter.
Mirza ZORNIC
Bosnia Herzegovina Mirza is macroeconomic analyst in Raiffeisen Bank BH dd Sarajevo. He has joined to the Research Team in spring 2022 after 16 years work activities as a Credit analyst in Raiffeisen Risk Department where he was in charge for Corporate, FI and LRG clients. With desire to make step forward and improve his analytical skills in macroeconomics, he decided to join the Raiffeisen Research Team. Mirza holds master’s degree of Economic Sciences at Sarajevo University and he has experience in management of public institutions/companies as a member of the Supervisory Board / Assembly / Audit Committee in public institutions/companies. In private, most of time he spends with his family but he is trying to find some moments for tennis, football and running as a passionate sport fan.
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