Transcript Slide 1

„Impact of the financial crisis on BH
economy“
by
Kemal Kozarić
Governor of the Central Bank of Bosnia and
Herzegovina
January 16, 2012
Macroeconomic indicators for BH
Gross Domestic Product (GDP)
GDP Per Capita
2010
2011 (estimate)
2012 (projection)
KM 24.75 billion
cca. KM 25.80 billion
cca. KM 26.80 billion
KM 6.440
Real Growth Rate
0.7%
1.8%
1.5%
Industrial Production Growth Rate
1.6%
7.1%
5%
Average Inflation on Annual Level
3.1%
3.1%
3.0%
27.1%
27.6 %
28%
KM 824 (November)
KM 820
BH Unemployment Rate
Average Salary on BH Level
KM 798
Foreign Debt
KM 6.25 billion (25.4 % GDP)
KM 6.64 billion (25.7 % GDP)
KM 7.3 billion (27.2 % GDP)
Current Account Deficit
KM 1.49 billion (6.1% GDP)
KM 2.3 billion (8% GDP)
KM 1.499 billion (GDP 4.1%)
52.1%
53.6% (January - December)
55%
KM 340 million
KM 470 mil. (first nine
months)
KM 6.457 billion
KM 6.420 billion
Imports Coverage
FDI (Estimate)
Foreign Reserves
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Macroeconomic indicators for BH
 Rating macroeconomic situation in Bosnia and Herzegovina
 "Better than one might expect"?
 (evaluation of part of academic and professional community, EC, IMF
and other international financial institutions)
 Worrying ... ↔ ... Disastrous?
 (evaluation of academic and professional community, NGOs, ... → data
on the growth of debt, foreign trade deficit, level of unemployment and
overall economic activity in the real sector, level of poverty, impacted
social groups, ...
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The structure of the financial sector in BH
 The banking sector dominates the financial system in BH.  It is
the principal source for financing of economy and households.
 A large percentage of foreign ownership is a potential risk because
strategic decisions are made outside the reach of the monetary
authorities of Bosnia and Herzegovina.
 Relatively small share of other financial intermediaries.
2007
Value,
KM million
Banks
2008
Share, %
Value,
KM million
2009
Share, %
Value,
KM million
2010
Share, %
Value,
KM million
Share, %
19.570
79,8
20.815
80,8
20.604
82,7
20.416
84,3
Investment funds
1.762
7,2
1.225
4,8
871
3,5
888
3,7
Leasing companies
1.378
5,6
1.607
6,2
1.416
5,7
1.108
4,6
Insurance and re-insurance companies
853
3,5
890
3,5
940
3,8
941
3,9
Microcredit organizations
946
3,9
1.213
4,7
1.087
4,4
856
3,5
Total
24.510
25.749
24.919
24.210
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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 commitments)
 High liquidity
 Good capital adequacy (16.1% in 2010 and 15.5% in Q1 2011)
 Profitability endangered
 Loss in 2010
 NPL increase
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Challenges and perspectives of the financial
sector in BH
 The main risks for the future:
 The current macroeconomic situation (global, EU, region, BH) - Risks

 Provision of real economic growth
 Maintenance of Financial Stability
 Threats to the fiscal position - fiscal deficit
 The revenue side
 Expenditure side (social transfers and public wages)
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What are the main risks for the banking
sector in BH (and region)?
 The possibility of spill-over of the crisis from home country of
foreign banking groups and the EU zone
 Pro-cyclicality 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 (respect and protection of local
interests)
 Exposure in the region
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What are the main risks for the banking
sector in BH (and region)?
 After the fall of the level of savings during the crisis, return of
confidence and increase in household savings (14% in 2010, 6%
for 9 months in 2011)
 A slight increase in lending activity (about 3% in 2010, 3.4% for
the first 6 months in 2011)
 The results of stress tests (for now, the banking system is well
capitalized and is resistant to shocks)
 Financial and banking sector has shown remarkable level of
resilience to the financial crisis?
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Future challenges for the banking sector
 There is certainly a difficult period ahead of us, but we should
try to:
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achieve adequate liquidity of capital;
avoid systemic risk at any cost;
achieve adequate capitalization;
achieve an adequate amount of cash in the vaults;
achieve adequate credit activity;
avoid any form of unfair competition
achieve adequate communication with internal and external public.
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Future challenges for the real sector
 In order for the economy to be able to achieve the desired
recovery, it is necessary to :
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support to domestic production, especially for exporters;
work on the increase of domestic goods consumption;
work on the development of unused potentials in the energy sector;
develop the significant potentials in the domain of food production;
work on restoring and building of new touristic capacities;
continue the privatization process;
work on developing 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.
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Thank you for your attention
http://www.cbbh.ba
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