BOSNIA FACES ECONOMIC CRISIS

SARAJEVO, Bosnia (October 29,2008) - Bosnia’s business environment “seriously legs behind” both other southeastern European countries and the European Union, finds the latest World Economic Forum report and this is likely to get worse.

The report analyses the business environment and financial environment in 16 European and central Asian countries, and compares their performance with European Union countries and EU-accession requirements.

According to analysts and economists, these results spell trouble for Bosnia, which has already been suffering from the first symptoms of the spreading global recession.

Two weeks ago, a sudden increase in deposit withdrawals – caused by panic among the population – caught several Bosnian commercial banks as well as country’s Central Bank by surprise.

The Bosnian Central Bank reacted swiftly, reducing obligatory cash reserves for banks from 18 to 14 percent, which improved the banks’ liquidity. In addition, Bosnia’s state government has proposed to parliament an urgent law which would increase state guarantees on deposits from 5,000 Bosnian Marks (2,500 Euros) to 20,000 Bosnian Marks (10,000 Euros).

Yet all economists agree that these moves ,however positive ,are not enough and that Bosnia's leaders,who have been caught in political deadlock for the past two years ,are still not aware of the seriousness of the crisis.

In addition to the disturbances in the banking sector and plummeting bourses, Bosnia’s industry is also facing trouble. Falling prices of iron and aluminum ,which make up a major part of Bosnia’s exports , threaten these industries and could also jeopardise the country’s mounting foreign trade deficit.

Economic experts agree that one of the key elements for combating the worsening global economic crisis would be for the Bosnian governments to swiftly improve business environment and attract foreign investments, which are already falling all over the region.

Yet according to the latest World Economic Forum indicators, Bosnia’s competitive index,at 3.12 points,is seriously legging behind the rest of the region, which is led by Croatia and Montenegro with 4.1 and 3.96 points respectably.

Such results give ground to assessments of some Bosnian economists and analysts who believe that the coming year will be extremely difficult for both Bosnian citizens and companies.
.