Macro: COVID-19 Update Bosnia and H.: In expectation of a gradual recovery

The Bosnian economy shrank at a record pace in April as the full force of lockdown measures was felt, crushing the manufacturing, exports, tourism and retail sales. Nevertheless, Aprils reading should have marked the low point of activity, as the May figures showed some minor signs of improvement at least on the mom level. Good news for the B&H economy is that the GDP dynamics manage to avoid recession in first three months of the year. According to preliminary GDP estimates, the economy grew more than expected 2.0% yoy in Q1 20.
We still project GDP to fall by -5.2% yoy in 2020, mainly due to the blow to private consumption and investments. Public consumption should increase due to fiscal spending and countermeasures that are expected to take effect in the second half of 2020.
The recent increase in infections and the reintroduction of containment measures poses a sizable risk for the recovery of the economy. However, for the time being, the B&H economy should hope for a quicker than expected recovery in the Euro area and EU, which will consequently lead to quicker than expected recovery of manufacturing and export of goods.

This Research was produced and first published by Raiffeisen Bank International AG which is supervised by the Austrian Financial Market Authority and the National Bank of Austria.