Bosnia a. H. Watch: Resilient rebound in Q3 points to record growth in 2021

The recovery of the B&H economy in 2021 was far more pronounced than initially expected, with all three quarters bringing above expected GDP growth rates. Supported heavily by strong tailwinds coming from exports of goods and services, GDP grew in Q3 by +8.4% yoy.

Exports of goods and services fueled GDP growth in 2021

BHAS, RBI/Raiffeisen Research

Q3 showed a continuation of the strong rebound - With GDP expanding by 8.4% yoy

The key real sector indicators in Q3 already pointed towards a continuation of the robust recovery trend - with only a modest slowdown of the pace - so the outcome of better-than-expected GDP growth did not come as a surprise. Therefore, Q3 GDP recorded a growth by 8.4% yoy (1.4pp higher than our forecast of 7% yoy) and up by 1.4% on a quarterly basis. Furthermore, the B&H Agency for statistics (BHAS) also revised upwards the previous growth rates for Q1 to 2.7% (from 2.5%) and Q2 to 12.1% (from 11.6%).

Based on the expenditure approach, all GDP components contributed positively to overall growth - improving both in annual and quarterly terms - with only final consumption (private + government spending) reporting negative quarterly dynamics, with a decline of -1.2% qoq. Exports of goods and services was vanguarding the recovery, being up by 51.3% yoy, led by widespread growth of exports of goods - exceeding pre-pandemic levels already - as well as the pent-up service sector dynamics. In particular, exports of goods rebounded significantly in 2021 as B&H considerably improved its market position in EU as our key export market where more than 70% of goods are exported. The competitiveness of domestic export oriented companies, mostly in the metal, wood and furniture industry and global demand pressure, strengthened the position in global supply chains, which would ultimately result with record high exported amount (over 7 bn EUR in 2021). Whereas the sevices sector was suppored by the loose containment measures and low levels of infections during the 4th wave in Q3, which enabled smooth summer months and a satisfying touristic season. However, imports of goods and services also strengthened further in Q3, with 32.9% yoy growth, thereby mitigating the exceptional contribution of exports to the overall GDP performance.

The pent-up demand in private consumption resulted in a 3.9% yoy growth rate in Q3 which was below our estimation that was initially based on the excellent retail sales performance and positive labour market performance in terms of both employment and unemployment and steady wage growth around 3.8% yoy. In addition, government consumption increased by 2.1% yoy, supporting the headline figure by 0.4pp, much like in the previous quarter. Gross capital formation was up by 16.2% yoy in Q3, with the expected stabilization of investment inflow in the next year - considering the fact that Securities Commission finally started to operate after the 20 months of stalemate in the local capital market.

After the exceptional growth in 2021, 2022-2023 should bring more moderate dynamics

BHAS, RBI/Raiffeisen Research

Both Q4 2021 and FY GDP forecast revised upwards

The better-than-expected Q3 dynamics and available Q4 sentiment indicators as well as the revised growth rates for Q1 and Q2, resulted in an upward revision of Q4 forecasted GDP growth to 3.6% yoy, from 2.5% yoy previously, supported by the same drivers as in the previous period (i.e. exports of goods and services and private consumption). Consequently, considering the substantial rebound effect from Q2 2021 onwards and the latest available data, we reckon growth will reach 6.8% yoy in 2021, adjusted up from 5.8% yoy previously, pointing to record high growth in real terms. In 2022-2023 we anticipate more moderate economic growth in rage 3.6% yoy in 2022 and 3.5% yoy in 2023.

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Asja GRDJO

location iconBosnia Herzegovina   

Asja Grdjo officially joined the Research team of Raiffeisen BANK B&H in the April 2021 with the role of the Senior Economic Analyst. After graduating Economics at the University of Sarajevo, Asja started to work as securities broker at Raiffeisen Bank's subsidiary brokerage house back in 2006. After five years, brokerage business was merged to Bank’s Treasury department where she has been working ever since. Through the different roles within the department (investments advisor, capital market specialist and proprietary manager), she strengthen her skills and knowledge being regularly involved also as a support for local Research team. As a former basketball player, Asja enjoys watching good basketball game as well passing her experience to her two daughters.

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Ivona ZAMETICA

location iconBosnia 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.