The Central Bank of Bosnia & Herzegovina has released Q4 and FY 2020 balance of payments statistics, which brought a substantial downward revision mostly of current account (CA) components, thus bringing the CA deficit to the lowest level as a percentage of GDP in modern Bosnian history.
The CA deficit stood at -3.2% of GDP, which was in line with Raiffeisen's FY 2020 forecast (-3.1% of GDP), before its upward revision due to negative Q3 CA data release (-3.7% of GDP), Raiffeisen Bank commented in a note.
The main reason for the improvement of Bosnia’s external imbalances was the decline of the trade deficit, which was down by 20.8% year-on-year and amounted to €3.2bn (-18.4% of GDP) which is also the lowest trade deficit on record.
The slump of domestic private investments and consumption resulted in a steep double-digit decline in merchandise imports (-13.3% y/y). On the other hand, merchandise exports in 2020 were down more moderately (-7.3% y/y) to €4.8bn, showing some resilience to the COVID-19 crisis despite a sharp contraction of foreign demand.
Secondary income and remittances from the Bosnian diaspora, which is also an important CA stabilising factor, saw a decline of 10% y/y. Secondary income, also important for financing private consumption, amounted to €1.9bn, a still substantial 10.7% of GDP, in 2020.
Raiffeisen analysts said that given the lower CA deficit level in 2020, they have slightly adjusted the FY forecast of the CA deficit to -4% of GDP in 2021.
The major risk for Raiffeisen's CA forecast and overall economic scenario of a moderate rebound in 2021 (3% real GDP growth), comes in the form of a prolonged third wave of COVID-19 infections and if vaccination has not been achieved from Q2 onwards, followed by a prolonged period of containment measures in Q2 and Q3.