Layoffs and a New Drop in Revenues expected in Bosnia and Herzegovina

October 3, 2020 1:30 PM

Prices of products and services used by citizens for personal consumption also fell in August 2020 compared to the same month last year. This negative trend in the last few months is indicated by the data of the Agency for Statistics of Bosnia and Herzegovina.

Prices fell by an average of 0.8 percent, and prices fell by 2.1 percent on an annual basis. Economist Zeljko Ricka told “Avaz” that these data often cause enthusiasm among citizens, but behind such indicators there is a much gloomier picture.

He explained that in essence, this trend is not positive, because it means that there has been a decrease in demand, so citizens buy and spend less. The lower the demand, the lower the production. This automatically reduces employment, the next consequence is a reduction in the salaries of those who keep their jobs. When all this happens, then there is a drop in taxes, which is why social funds usually suffer, Ricka explained.

He added that this signal is worrying and requires analysis of why such phenomena occur on the market.

”This leads to the cessation of production of products, to which the price falls the most, because producers cannot withstand the continuous decline in the selling price of their products. This is not a good sign, prices need to be restored, however, it is a complex process that would require deeper market intervention. Recession and deflation are the ultimate consequences,” stressed Ricka.

Admir Cavalic, an economic analyst, says the coronavirus pandemic has changed the pattern and structure of consumption in BiH.

There has been a drastic drop in consumption, and thus the offer follows the new market relations and adjusts to the above through lower prices of products and services. Although it is difficult to draw any valid conclusion based on the monthly trend, it is indicative that the prices of alcoholic beverages have risen, which otherwise accompanies economic crises, Cavalic pointed out.

He added that we have evident deflation on the ground and that growth, ie stabilization of prices, is not expected yet, but the continuation of these tendencies. The passing of summer optimism and entering the “deep winter” is especially worrying.

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