BUSINESS

3.4 Percent less Inflows of Direct Investments in Bosnia and Herzegovina

 

On the side of financial flows calculated within the financial account, there is a noticeable trend of reduced inflows of direct investments in Bosnia and Herzegovina in the first quarters, which has been evident since 2017.

Inflows of direct investments in Bosnia and Herzegovina for the first quarter of 2020 amounted to KM 243.2 million, which is 3.4% less compared to the same period last year, and domestic investments abroad were negligible. At the same time, there were significant outflows abroad in the form of portfolio investments of KM 65.6 million, so the net flows of portfolio investments amounted to KM 64.5 million. The component of net other investments recorded an increase (due to a decrease in liabilities and an increase in assets) in the nominal amount of KM 78.8 million, while reserve assets in the first quarter of 2020 decreased by KM 144.6 million.

According to the balance of payments data for 2019, which are also available, the current account deficit for 2019 amounted to KM 1,235.7 million, which is nominally at the same level as in 2018, while in relative terms to GDP was 3.5%. In 2019, compared to 2018, the trade deficit deepened by 6.4%. However, the positive balances of services and secondary income recorded an increase in the observed year compared to the previous year, by 6.1% and 7.5% respectively. Within secondary income, remittances in 2019 amounted to a record KM 2.7 billion, which is an increase of 9.3% compared to the previous year.

According to the annual data of the financial account of direct investment in Bosnia and Herzegovina, i.e. liabilities of direct investment (inflows in Bosnia and Herzegovina) for 2019 amounted to KM 898.6 million, which is an increase of 11.6% or KM 93.6 million compared to the previous, 2018 year. Net other investments are an important item for financing the current account deficit and are usually higher than direct investments, but in 2019, they recorded KM 761.8 million, which is a significant decrease of KM 447.3 million or 37.0% in compared to 2018, when they amounted to KM 1,209.2 million. One of the reasons is the reduced withdrawal of loans from abroad.

Reserve assets (foreign exchange reserves) during 2019 recorded an increase of KM 935.0 million which illustrates that the continuous current account deficit did not cause pressure on foreign exchange reserves.

 

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