Boston, MA -- (ReleaseWire) -- 04/11/2014 -- The domestic political environment remains heavily divided along ethnic lines, stunting structural reform and weighing on the country's EU membership ambitions. Increased international pressure may push the government to approve some long-delayed reforms, but progress is set to remain slow.
We expect Bosnia's export-led recovery to continue through 2014, with gradually increasing support from domestic demand. We have raised our real GDP estimate for 2013 growth to 1.1% (from 0.8%), while maintaining our forecast for 2014 at 2.0%.
Political instability in the run up to October's elections, high structural unemployment, and ongoing regional fragility remain downside risks in our outlook.
However, the government's Stand-By Agreement with the IMF will continue to anchor fiscal policy, and should ensure that a budget for 2014 is approved at both the entity and state levels before the end of the year.
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Major Forecast Changes
We have revised up our estimate for 2013 real GDP growth, to 1.1% from 0.8% previously, although maintain our 2.0% forecast for 2014.
We have revised our estimate for the 2013 current account deficit, due to a sharp reduction in the merchandise trade deficit in the first nine months in the year. We now estimate a shortfall of 6.9% of GDP, down from 9.0% in 2012, and falling further to 6.2% of GDP in 2014.
Key Risks To Outlook
The country's first post-war census was finally carried out in October 2013, an important achievement that nonetheless generates new risks given the potential impact the results could have on the country's complex power-sharing agreements.
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