Transcript Prof. Dr. Anto Domazet, Director, Sarajevo Institute of Economics

Prof. dr. Anto Domazet
Influence of global economic
crisis on Bosnia and Herzegovina
PANEL LECTURE
Global Economic Crisis: Implications and
the Way Out for Turkey, Bosnia and
Herzegovina and the Western Balkans
Sarajevo 20 October 2009
For whom the Bell Tolls ?
"No man is an island, intire of itself. Every man is a piece of the
Continent, a part of the main. If a clod (piece of dirt) be washed
away by the sea, Europe is the lesser... Any man's death
diminishes me, because I am involved in Mankind. And
therefore, never send to know for whom the bell tolls; it tolls for
thee.“ (Ernest Hamingway)
„Nijedan čovjek nije otok sam za sebe; svaki čovjek je dio
kontinenta, dio okeana. Ako more odnese grudu zemlje, Evrope
je manje...Smrt svakoga čovjeka smanjuje tebe jer si
obuhvaćen u čovječanstvu. I zato nikada ne pitaj kome zvono
zvoni; tebi zvoni!" (Ernest Hemingway)
Agenda
1.
2.
3.
4.
What where we before recession had
started
What is impact of recession on our
economy and our lifes
What governments and other actors of
economic activity did in meantime
What has to be done to overcome
recession
Crisis – unknown phenomen in
Bosnia and Herzegovina



Lack of research and low level of knowledge
about recession and crisis in BH
No relevant analysis and estimation of
future develpment of recession and crisis
Everyone would like to hear or communicate
good news, but no signs of positive
economic development in BH
Recession or depression – how long
it will last?
GDP growth rates 2005-2014.
8
6,9
6,8
5,5
6
4
6
6
6
6
6
4,5
4
3,9
6
2
0,5
0
2005
2006
2007
2008
2009
2010
2011
-2
-3
-4
Estimated by IMF
Extrapolation
Source: IMF Country Report No. 09/226, www.imf.org
2012
2013
2014
Cost of recession – about 1.354 mil.
KM, cost of crisis 9,4 bill. KM
Hystorical, projected and estimated dynamic of GDP (mil. KM)
35.000
33.837
33.000
32.073
30.401
31.000
29.219
28.816
29.000
26.378
25.890
27.000
24.545
25.000
24.545 24.545
23.808
23.000
24.884
23.928
24.545
24.545
24.545 24.545
21.640
21.000
19.121
19.000
17.000
27.960
27.314
16.928
15.000
2005
2006
2007
Estimated by IMF
2008
2009
2010
2011
Projection at 5,5% growth
2012
2013
Projection 2008 level
2014
Real sector weakenning, service sector
strenghtenning its share in GDP
35,0
Structure of Gross domestic product in BH 2002.- 2007. (% )
29,3
30,0
24,8
25,0
21,6
20,0
25,2
24,6
19,7
15,0
15,0
12,5
9,6
10,0
5,3
5,8
2002.
2007.
6,7
5,0
0,0
2002
2007.
AB Agriculture
2002.
2007.
C,E Mining
& industry
Source: www.bhas.ba
FConstruction
2002.
2007.
G,H,I Trade,
transport,
2002.
2007.
J, K-financial,
business and
real estate
2002.
2007.
L-P -Public
services
Modest results in reindustrialization
of the country
Industrial production in Federation of BH Industrial production in Republika Srpska
Source: Bulletin CB BH 2/09
Big decline in construction works in 2009 in
F BH (-20,4%) and growth in RS (6,5%)
Construction in F BiH
Source: Bulletin CB BH 2/09
and RS
Serious decline in tourism in 2009.
(-7,9% total arrivals, - 13,7% total nights)
Tourist arrivals in BH (thousands)
700
584
600
1.600
611
563
499
500
400
375
388
418
214
200 161
220
167
223
194
1.400
1.000
217217
243256
306
277
322
289
308
255
0
0
2003
2004
Domestic
2005
2006
Foreign
2007
2008
Total
2009 est.
903
600 503
400
400
200
1.395
1.284
1.176
914
999
1.018
800
100
2002
1.337
1.200
434
300
Tourist nights in BH (in thousands)
2002
Source: www.zsrs.ba, www.fzs.ba
505
409
533
466
2003
2004
533485
582594
642695
2005 2006 2007
Domestic Foreign Total
678719
684
600
2008 2009 est.
Decreasing purchaising power lowers
trade distribution activity in BH
7.000,00
5.989,30
6.000,00
F BH
Turnover in wholesale and retailing (in mil KM)
5.342,00
3.741,30
Total
6.669,20
5.964,60
5.164,10
5.157,60
5.000,00
4.000,00
RS
4.013,90
4.110,50
4.470,00
3.543,50
3.956,70
3.099,70
3.000,00
2.000,00
2.490,50
1.600,70
1.620,60
1.975,40
2.199,20
2.007,90
1.620,00
2.057,90
1.000,00
2007 IV Q
2008 IQ
2008 IIQ
Source: www.zsrs.ba, www.fzs.ba
2008 IIIQ
2008IV
2009IQ
2009 II Q
Export and imports – the most sensitive
indicators of recession in BH (1)
8.000.000
Exports to main trade areas (Thous. KM)
6.711.690
7.000.000
6.000.000
5.936.895
5.164.339
5.294.250
5.000.000
4.000.000
3.703.290
3.400.860
2.977.037
3.000.000
2.000.000
1.700.218
1.000.000
487.084
2.415.030
2.006.623
2.858.025
1.925.709
529.412
593.370
510.516
0
2006.
Source: www.bhas.ba
2007
CEFTA
2008
EU
2009
OTHERS
TOTAL
Export and imports – the most sensitive
indicators of recession in BH (2)
Imports from main trade areas (Mil. KM)
18.000.000
16.000.000
13.906.934
16.286.056
13.898.709
14.000.000
12.028.920
12.000.000
10.000.000
8.000.000
5.360.407
6.000.000
4.000.000
2.000.000
7.814.757
6.642.380
5.653.430
2.893.097,35
3.929.255
4.702.625
5.898.900
3.205.830
3.327.074
3.768.674
2.924.130
0
2006
Source: www.bhas.ba
2007
2008
CEFTA
EU
2009
OTHERS
TOTAL
Estimated unemployment due
the recession 25-35.000 persons
Source: Bulletin CB BH
BH - losing competitiveness capacity for
mid-term growth
Albania
Position of BH in global
competitiveness 2008 2009
5
43,89
3,55
Serbia
33,44
4,15
3,90
3,82
3,30
BH
3,93
2,74
3,42
2
Basic requirements
3,56
Efficiency enhancers
2,80
Innovation factors
1
Overall score
0
Moldova
3,33
3,99 3,482,83
3,75
3,95
4,11
3,16
3,58
Macedonia
4,52
3,87
4,42
Montenegro
3,70
4,08
4,22
4,69
Croatia
Source: Global Competitiveness Report 2009, www.weforum.com
Key macroeconomic indicators -projecting
higher debt and lower CAB deficit
Average decrease of revenue of 10%
- clear sign of recession in BH
6000
5000
4000
State and entities revenue (2006-2009) in mil. KM
5.702,0
5.273,2
5.339,0
4713,2
4.902,5
4348,3
4.676,0
4.924,3
3.119,5
2.868,6
1000
0
4.766,80
4.409,50
4104,7
3000
2000
5248,4
2.794,50
2448,8
861,6
557,8
2006
Current Revenues
VAT
919,2
939,6
655,6
651,7
2007
2008
Taxes
Excises
*
* estimated, source VAT Directorate, www.oma.ba
1.006,70
349,20
2009*
Indirect taxes
Customs duties
Recovering money supply but still
not favorable conditions of credits
Money supply VI 2008-VIII 2009 (mil. KM)
13.370
12.380
14.000,00
13.000,00
13.370
12.000,00
11.000,00
10.000,00
9.000,00
7.174
6.651
8.000,00
7.000,00
6.921
5.528
6.000,00
5.704
6.242
5.000,00
06.
07.
08.
09.
10.
11.
12.
01.
02.
03.
04.
05.
06.
07.
08.
2008. 2008. 2008. 2008. 2008. 2008. 2008. 2009. 2009. 2009. 2009. 2009. 2009. 2009. 2009.
M1
QM
M2
Lower claims becouse of higher
credit risks and higher interest rates
Banks claims on non-government sector in BH (Mil. KM)
15.000,00
14.608
14.000,00
13.000,00
14.164
13.734
12.000,00
11.000,00
10.000,00
9.000,00
6.237
6.290
6.735
6.458
6.404 6.791
8.000,00
7.000,00
6.000,00
06.
07.
08.
09.
10.
11.
12.
01.
02.
03.
04.
05.
06.
07.
08.
2008. 2008. 2008. 2008. 2008. 2008. 2008. 2009. 2009. 2009. 2009. 2009. 2009. 2009. 2009.
Claims from private companies
Claims from housholds
TOTAL Claims
Monetization of BH economy – money supplay
grows faster than real economy (GDP)
Monetary agregates as % of GDP
60
56,2
M2
51,4
20
52,6
46,5
50
30
MQ
56,1
51,1
40
M1
40,9
39,5
23,4
18,1
23,2
19.1
24,1
22,1
26
28,2
25,1
28,2
28,3
27,2
24,2
28,8
18,6
15,6
10
0
2002
2003
2004
Source: Central Bank of BH
2005
2006
2007
2008
I-VII 2009
BH entered recession as neglected
society and economy with old
fashioned politics




BH economy was overheat in 2008, with consumption-lead
growth, based on high credit and fiscal expansion
Low competitiveness and lack of political will to start
structural reforms in social and economic field on the EU
way, needed to activate potentail sources of development
The main consequences of recession are: a) drop in GDP,
fiscal revenue, public, household and investments
consumption and external sector activities (export, import,
FDI, tourism, remittances), b) losses of working places, c)
credit contraction and more expansive money, d)
bankruptcies
More intensive social tensions – higher risk of poverty
Global recession and Made in BH
attributes (magic triangle of BH reality)
Global recession
EU Regional impact
BH reality
Economy
Ekonomija
Socijalna
sfera
Social
sphere
Politička
struktura
Political
sphere
Main challenges of BH
development







Political consensus about future of the country and its
political organization
Growth of competitiveness based on efficiency driven
stage of development
Improve the governance in global unstability and
recession
Increase the level of investments and employment – to
mobilize potential sources of development
To speed up economic, spocial and political reforms and
integration in EU – to reach status of candidate for
membership
Fighting corruption and organized crime
Building up strong state and market institutions
The question of sustainability– there
is need for new politics for better
economy and fair social system
POLITICS
BH as a functional state
EU and global integration
Rules of low
Fighting corruption and
organized crime
Private vs public sectors
Market regulation
Market institutions
SOCIAL SECTOR
ECONOMY
Social state and security
Equal chances for all
Improve education and health
Reforming tax and social benefits system
Reforming pension system
Fighting poverty
Improve labor regulation
Social care for children and old people
Macroeconomic stability - SES
Improve business environemnt
Attract domestic and foreign inv.
R&D and Support competitiveness
Openning new working places
Support SMEs and farmers
Privete public partnership
Export – lead growth
What have governments done – trying to
save themselves or to help to the others
Intensity of govenment engagement to confront with crisis
Support to business
Expenditure reduction
7
6
5
4 4
3
3
2 2
1
5
4 3
1
1
0
Serbia
Croatia
BH
7
Tax increasing
1
2
5
Social support
6
7
Indebtedness
Fire faighting in line with systematic
approach to structural and sectoral reforms
(Supply side vs demand side approach)
Supply side
Demand side
Reforming economy
Reducing taxes
Supplying money under
favorable conditions (RB)
Privatization to activate
business/improve performances
Supporting education
Promoting entrepreneuership
Investing in business
infrastructure (business parks
Deeper integration in EU
Better access to credits for
households
Public investments
Subsidies for working places
Increasing public consumption by increasing taxes
Selecting VAT rates
Requisition of property
gained by crime
Is recovery natural phenomen?
(More realistic approach – to combine
internal efforts with global recovery)
High
2.
1.
Good expectations
Winners
Risk of the growth
Recovery and fast
growth
3.
4.
Losers
Bad expectations
No recovery – long-term
depression and crisis
Recovery in long-term
period
SUCCESS
OF
REFORMS
Weak
Slow
GLOBALNI RECOVERY
Fast
Thank you for your attention.