macroeconomic indicators in bh and banking sector in bh

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MACROECONOMIC INDICATORS IN MACROECONOMIC INDICATORS IN BH BH AND AND BANKING SECTOR BANKING SECTOR IN IN BH BH Sarajevo, January Sarajevo, January 25 25 , 2005 , 2005 KEMAL KOZARIĆ, KEMAL KOZARIĆ, CENTRAL BANK OF BOSNIA AND HERZEGOVINA CENTRAL BANK OF BOSNIA AND HERZEGOVINA

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MACROECONOMIC INDICATORS IN BH AND BANKING SECTOR IN BH. KEMAL KOZARIĆ, CENTRAL BANK OF BOSNIA AND HERZEGOVINA. Sarajevo, January 25 , 2005. Contents. Basic indicators of BH economy Banking system in BH: Commercial banking sector in BH Central bank of BH (CBBH). - PowerPoint PPT Presentation

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Page 1: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

MACROECONOMIC INDICATORS INMACROECONOMIC INDICATORS IN

BHBH AND AND BANKING SECTOR BANKING SECTOR IN IN BHBH

Sarajevo, JanuarySarajevo, January 25 25, 2005, 2005

KEMAL KOZARIĆ, KEMAL KOZARIĆ,

CENTRAL BANK OF BOSNIA AND HERZEGOVINACENTRAL BANK OF BOSNIA AND HERZEGOVINA

Page 2: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

2

Basic indicators of BH economyBasic indicators of BH economy

Banking system in BH:Banking system in BH:Commercial banking sector in BHCommercial banking sector in BH

Central bank of BH (CBBH)Central bank of BH (CBBH)

Contents Contents

Page 3: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

3

According to the official data, GDP of BH in 2003 was According to the official data, GDP of BH in 2003 was KM 12,170 billion. If the effects of the informal sector KM 12,170 billion. If the effects of the informal sector included, according to the CBBH estimations, GDP was included, according to the CBBH estimations, GDP was KM 16,770 billion.KM 16,770 billion.

For the period 1999-2003, average estimated rate of For the period 1999-2003, average estimated rate of real GDP growth was 5, 4%, which can be considered real GDP growth was 5, 4%, which can be considered as favorable rate, given the structural changes which as favorable rate, given the structural changes which BH is passing currentlyBH is passing currently

The growth over the short-termed period is The growth over the short-termed period is estimated to be estimated to be 5,5, 5%. 5%.

Basic indicators of BH economyBasic indicators of BH economy

Page 4: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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Basic indicators of BH economyBasic indicators of BH economy::GDP GDP

15,7

9,8

5,54,4

5,5

3,5

0

2

4

6

8

10

12

14

16

18

1998 1999 2000 2001 2002 2003

Ch

an

ge

in % 3,5%

5,5% 5,5% 5,5% 5,5%

0%

2%

4%

6%

2003 2004 2005 2006 2007

Real GDP(annual change in %)

Real GDP growth projection

(Source: CBBH) (Soource: PRSP)

Page 5: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

5

Basic indicators of BH economyBasic indicators of BH economy::Real GDP - Comparison in the region Real GDP - Comparison in the region

(Source: Transition Report Update, EBRD, March 2004.)

(annual change in %)

-7%

-5%

-3%

-1%

1%

3%

5%

7%

2000 2001 2002 2003Cha

nge

in %

BH BulgariaCzech Republic CroatiaMacedonia SloveniaSerbia and Montenegro

Page 6: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

6

Inflation is stable and low. In November 2004, it Inflation is stable and low. In November 2004, it amounted 0, 6%, representing one of the lowest amounted 0, 6%, representing one of the lowest inflation rate in the region. inflation rate in the region.

Stability and inflation level are result of successful Stability and inflation level are result of successful running of the CBBH’s monetary policy according to running of the CBBH’s monetary policy according to the principles of the Currency Board Arrangement, the principles of the Currency Board Arrangement, meaning fixed KM exchange rate pegged to euro. meaning fixed KM exchange rate pegged to euro.

Basic indicators of BH economyBasic indicators of BH economy::InflationInflation

Page 7: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

7

Basic indicators of BH economy:Basic indicators of BH economy:InflationInflation

Inflation in BH Comparison with the inflation in the region

(Source: CBBH) (Source: Transition Report Update, EBRD, March 2004, IMF Country Report No: 04/67 March 2004)

0%

2%

4%

6%

8%

10%

12%

2000 2001 2002 2003

BH Croatia Czech Republic Slovenia Bulgaria Macedonia

0%

1%

2%

3%

4%

5%

6%

2000 2001 2002 2003 Nov. 2004.

Inflation in BH

Page 8: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

8

According to the official data, unemployment rate in BH According to the official data, unemployment rate in BH was the largest in the region and in October 2004 was was the largest in the region and in October 2004 was 43%. However, these data should be considered with 43%. However, these data should be considered with caution having in mind the estimated volume of grey caution having in mind the estimated volume of grey economy economy and method of recording of unemployed, so the and method of recording of unemployed, so the estimate of real unemployment rate in estimate of real unemployment rate in 2003 2003 was was 19,19, 6%. 6%.

Basic indicators of BH economyBasic indicators of BH economy::UnemploymentUnemployment

22,9%21,1%

19,6%

0,0%

10,0%

20,0%

30,0%

2001 2002 2003

(Source: CBBH – data on unemployment with grey economy included)

Page 9: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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Imports coverage with exports in December 2004, Imports coverage with exports in December 2004, totaled to 32%.totaled to 32%.

According to indicators of the total economic activities According to indicators of the total economic activities with abroad, BH still records high foreign trade deficit, with abroad, BH still records high foreign trade deficit, which, for the first 11 months of 2004 totalled to KM which, for the first 11 months of 2004 totalled to KM 6, 93 6, 93 billionbillion. .

Basic indicators of BH economy:Basic indicators of BH economy:Imports coverageImports coverage with exports with exports

Page 10: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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Servicing of the foreign debt is carried out successfully. At Servicing of the foreign debt is carried out successfully. At the end of the third quarter of 2004, foreign debt balance was the end of the third quarter of 2004, foreign debt balance was KM 4, 1 billion. Total amount of the foreign debt in the KM 4, 1 billion. Total amount of the foreign debt in the observed period is by 1, 4% higher compared to the end of observed period is by 1, 4% higher compared to the end of 2003. 2003.

During 2004, it was continued the implementation of the During 2004, it was continued the implementation of the accountable fiscal policy, directed to stabilization of accountable fiscal policy, directed to stabilization of macroeconomic situation in BH.macroeconomic situation in BH.

The Agency for Indirect Taxation has been established at the The Agency for Indirect Taxation has been established at the state level and activities are directed towards the delivery of state level and activities are directed towards the delivery of legal regulations for VAT introduction. legal regulations for VAT introduction.

During 2003, the fiscal balance surplus was During 2003, the fiscal balance surplus was performedperformed for for the first time and over the first six months of 2004 it amounted the first time and over the first six months of 2004 it amounted to KM 149 million.to KM 149 million.

Basic indicators of BH economy:Basic indicators of BH economy:Foreign Foreign debt and fiscal policydebt and fiscal policy

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Basic indicators of BH economyBasic indicators of BH economy::Fiscal balanceFiscal balance

0,0%

1,4% 1,6%2,5%

4,6%5,6%

-0,2%

-1%

4%

9%

-5,2-5,8 -5,6

-4,6-3,6

0,2

-10

-8

-6

-4

-2

0

2

1998 1999 2000 2001 2002 2003

(In

GD

P %

)

Fiscal balance (deficit and surplus)

Fiscal deficit in countries of the region (2003)

(Source: Transition Report Update, EBRD, March 2004)

Page 12: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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Foreign direct investment for nine months of 2004 Foreign direct investment for nine months of 2004 amounted to KM 532 million, while total foreign amounted to KM 532 million, while total foreign investments amounted to KM 943 million.investments amounted to KM 943 million.

Most of investments were in banking 35, 1%, Most of investments were in banking 35, 1%, manufacturing 31% and trade 11, 3% of total foreign manufacturing 31% and trade 11, 3% of total foreign direct investment.direct investment.

Most of investments were from Austria in amount of Most of investments were from Austria in amount of KM 269 million, followed by Croatia with KM 79 million KM 269 million, followed by Croatia with KM 79 million and Slovenia with KM 34 million. These three countries and Slovenia with KM 34 million. These three countries account for 72% of all direct foreign investment. account for 72% of all direct foreign investment.

The largest recorded inflow of investments was The largest recorded inflow of investments was during the second quarter. during the second quarter.

Basic indicators of BH economyBasic indicators of BH economy::Foreign investmentsForeign investments

Page 13: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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Basic indicators of BH economyBasic indicators of BH economy::Foreign investmentsForeign investments

(Source: CBBH)

0

50

100

150

200

250

300

350

400

Jan-Mar '04 Apr-Jun '04 Jul-Sep '04

In K

M m

illi

on

Direct Total

Page 14: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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CBBH foreign reserves have recorded constant growth. At CBBH foreign reserves have recorded constant growth. At the end of 2003 they amounted to KM 2, 781 billion. the end of 2003 they amounted to KM 2, 781 billion. According to the CBBH data, as of November 1, 2004, the According to the CBBH data, as of November 1, 2004, the CBBH foreign reserves amounted to KM 3, 341 billion.CBBH foreign reserves amounted to KM 3, 341 billion.

Indicators of BH economy:Indicators of BH economy:Foreign reservesForeign reserves

0,00

500,00

1.000,00

1.500,00

2.000,00

2.500,00

3.000,00

3.500,00

4.000,00

2000 2001 2002 2003 2004 nov.

Gro

ss r

eser

ves

0

1

2

3

4

5

6

In m

onth

s

Gross reserves Imports value per months

In KM million

(Source: CBBH)

Page 15: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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Return of confidence Return of confidence

Savings growthSavings growth

Higher level of banking servicesHigher level of banking services

Real competitionReal competition

High level of foreign investments High level of foreign investments

Banking sector: Banking sector: Accelerated developmentAccelerated development

Page 16: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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Payment systems reform Payment systems reform

Significant increase in minimum of the banking Significant increase in minimum of the banking capitalcapital

Network of banks in entire BH Network of banks in entire BH

Deposit insuranceDeposit insurance

State-owned banks privatizationState-owned banks privatization

Banking sector: Banking sector: ChangesChanges

Page 17: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

* Breakup not available. ** Data from September 31, 2004.

  31.12.2000 31.12.2002 1.01.2005

Total number of banks 55 40 33

Ownership:    

Private-owned banks 36 34 27

State-owned banks 19 6 6

Capital structure (in %):

State capital: 47 10 16**

Local private capital53*

24 20**

Foreign private capital 67 64**

Banking sector: Banking sector: Capital structureCapital structure

Page 18: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

  31.12.2000 31.12.2001 31.12.2002 31.12.2003 30.11.2004

 Amoun

tShare

Amount

ShareAmoun

tShare

Amount

ShareAmoun

tShare

TOTAL CREDITS 1652 100% 2101 100% 3213 100% 5122 100% 5792 100%

PRIVATE COMPANIES

833 50% 988 47% 1304 41% 1860 36% 2376 41%

PUBLIC ENTERPRISES

322 20% 350 16% 361 11% 1167 23% 706 12%

CITIZENS 375 23% 647 31% 1415 44% 1966 38% 2587 45%

OTHER SECTORS 122 7% 116 6% 133 4% 129 3% 123 2%

(end of period – in KM million)

Banking sector: Banking sector: CreditsCredits

Page 19: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

  31.12.2000 31.12.2001 31.12.2002 31.12.2003 30.11.2004

  Amount ShareAmoun

tShare Amount Share

Amount

Share Amount Share

TOTAL DEPOSITS 2094 100% 3324 100% 4158 100% 4366 100% 5502 100%

OUT OF THAT:

KM DEPOSITS 895 43% 1214 36% 1749 42% 2274 52% 2852 52%

FOREIGN CURRENCIES DEPOSITS

1199 57% 2110 63% 2409 58% 2092 48% 2650 48%

(end of period – in KM million)

Banking sector: Banking sector: Deposits of companies and citizensDeposits of companies and citizens

Page 20: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

Banking sector: Banking sector: Interest ratesInterest rates

Date Private companies Households

 Rates on short-termed

loansRates on long-termed

loansRates on “a-vista”

depositsLong term savings

Dec. 2002. 12,07% 10,59% 1,44% 4,38%

Dec. 2003. 10,54% 9,18% 0,96% 3,40%

Nov. 2004. 10,31% 9,15% 0,79% 3,78%

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For seven years of operations, the CBBH achieved its main For seven years of operations, the CBBH achieved its main task, which is maintaining of monetary and financial stability in task, which is maintaining of monetary and financial stability in the country, including the price stability. This is achieved by the country, including the price stability. This is achieved by consistent implementation of monetary policy through consistent implementation of monetary policy through Currency Board Arrangement. Currency Board Arrangement.

KM has become the stable currency against euro and has the KM has become the stable currency against euro and has the full confidence of citizens. The full convertibility in BH and full confidence of citizens. The full convertibility in BH and wider has been achieved and each KM in the circulation has wider has been achieved and each KM in the circulation has the full coverage in convertible foreign currency. the full coverage in convertible foreign currency.

Limitations of the Currency Board Arrangement: the CBBH Limitations of the Currency Board Arrangement: the CBBH cannot credit the government, cannot act as the lender of last cannot credit the government, cannot act as the lender of last resort, cannot directly fund the economic development, and resort, cannot directly fund the economic development, and the exchange rate cannot be used as the instrument the exchange rate cannot be used as the instrument adjustment of economic shocks or bad economic behavior.adjustment of economic shocks or bad economic behavior.

CBBH:CBBH:Achieved resultsAchieved results

Page 22: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

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The CBBH has established the Single Registry of The CBBH has established the Single Registry of Transaction Accounts Transaction Accounts

Preparations for transfer of the supervision over the Preparations for transfer of the supervision over the commercial banks’ operations in BH under the commercial banks’ operations in BH under the umbrella of the CBBH is underway. umbrella of the CBBH is underway.

The CBBH is actively participating in the The CBBH is actively participating in the development of the Capital Market in the country and development of the Capital Market in the country and in preparations for the European integrations.in preparations for the European integrations.

CBBH:CBBH:Present and planned activities Present and planned activities

Page 23: MACROECONOMIC INDICATORS IN BH  AND  BANKING SECTOR  IN  BH

DATE FOREIGN ASSETSMONETARY

LIABILITIESFREE RESERVES

DEC. 1997. 144,1 160,3 - 16,2

DEC. 1998. 283,3 253,9 29,4

DEC. 1999. 865,7 836,7 29,0

DEC. 2000. 1021,2 973,2 48,0

DEC. 2001. 2666,6 2591,6 75,0

DEC. 2002. 2463,2 2345,1 118,1

DEC. 2003. 2.779,6 2.626,3 153,3

NOV. 2004. 3.341,5 3.168,2 172,3

(end of period – in KM million)

CBBH:CBBH:Foreign reservesForeign reserves