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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011
BANJA LUKA STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Political Outlook
The political temperature in Bosnia &
Herzegovina (B&H) has been extremely hot
due to the general elections at the beginning
of October. For the three-member Presidency
of B&H, the highest number of votes for the
Croatian member got the candidate of the
Social Democratic Party, Zeljko Komsiæ,
followed by the Serbian member candidate of
the Alliance of the Independent Social
Democrats, Nebojsa Radmanoviæ, while for
the next four years Bosniaks will be
represented by Bakir Izetbegoviæ, the
candidate of the Party of the Democratic
Action. Regarding the composition of the state
Parliamentary seats, the majority number of
the seats from the Republic of Srpska will
again be represented by the Alliance of the
Independent Social Democrats, while the
majority of the seats from the Federation of
B&H will be split between the Social
Democratic Party, the Party of the Democratic
Action and the Croatian Democratic Union of
B&H. In September 2010, the Parliamentary
Assembly of B&H extended the mandate to
the Director of the State Agency for Prevention
of Corruption, needed for completion of the
final condition for the visa regime liberalization
by the Schengen group of countries which
should be applied for B&H citizens starting
from January 2011, at the latest. However, a
new government would need to speed up the
process related to Constitutional reform or
progress in privatization and the labour market
reform agenda, required as a prerequisite for
the application of the candidate status for EU
membership, which was planned already for
2010. As a result of the deadlock on the
political scene and in terms of reform
progress, Western powers extended the
deadline for the replacement of the Office of
the High Representative with the EU Special
Representative Office until the end of 2011,
which would have much less sweeping powers
in B&H politics.
Economic Outlook
Even though a deadlock in the pace of
reforms set by the EU accession agenda was
seen in the last period, B&H authorities
showed quite satisfying competence in
meeting the necessary conditions set by the
IMF within the Stand-by Arrangement (SBA)
signed in July 2009. On September 21, the
IMF gave its positive assessment after its
second review under the SBA,after all
conditions were fulfilled preceding the fourth
tranche disbursement: cuts of the wage bill
and adoption of the new Law on salaries in
public institutions, amendment of the entity
budgets, revision of the war veterans disability
recipients and adoption of the strategy for the
pension reform. Hence, in October 2010, with
the additional fourth tranche of EUR 38 mn,
B&H will have received EUR 383.9 mn as
direct support to the troubled budgets and
public finances, with the expected general
budget deficit estimated to be 4% of GDP in
2010. The strengthening of the authorities’
policies and the financial support under the
SBA has helped in stabilization of the B&H
economy, where after a quite depressing
macroeconomic picture mirrored in an overall
GDP drop by -2.9% yoy in 2009, signs of
macroeconomic stabilization could be seen in
the first three quarters of 2010. A positive
impulse to the economy came through an
improving external sector environment and a
recovery of the main trading partners’
demand, which resulted in vigorous growth of
B&H exports (29.9% on average) driven by the
expansion of industrial metals exports
(aluminium and steel). Meanwhile, overall
industrial production dynamics also started to
recover and registered 7% yoy growth in
August 2010. However, the combination of
rising unemployment and wage cuts, along
with restrained credit growth in the banking
sector, will hamper a more prominent revival of
the domestic consumption which is a major
driver of the economic growth in B&H (80% of
GDP). Thus, we expect subdued overall real
GDP growth by 0.5% yoy in 2010.
Equity Market Outlook
After slipping to their all-time lows at the end
of July 2010, both blue chip indices of the
Sarajevo and Banja Luka Stock Exchanges
recovered some of their ytd losses and
reported a moderately positive quarter-onquarter
performance. Moreover, the blue chip
index of the Sarajevo SE (SASX-10) dove in
red territory by –15.1% ytd by end of
September, with some fundamental upside
potential for some of the blue chips in the midterm.
On the other hand, the blue chip index of
Banja Luka SE (BIRS) lost -14.1% ytd in the
same period, but saw a rebound and fairly
good 4Q performance of +11.4%. The bearish
market performance was accompanied by
poor liquidity and participation of foreign
investors in the market. Hence, total turnover
of both markets until the end of 2010
amounted to EUR 145.6 mn and foreign
investors’ participation of 15% on average in
total trading.
Information obtained from the Exchange.
Key Information Contacts
Ministers Council of Bosnia and Herzegovina www.vijeceministara.gov.ba
Ministry of Foreign Affairs of Bosnia and Herzegovina www.mvp.gov.ba
Republic of Srpska Government www.vladars.net
Central Bank of Bosnia and Herzegovina www.cbbh.ba
Republic of Srpska Securities Commission www.sec.rs.ba
Central Registry of Securities of Republic of Srpska www.crhovrs.org
Foreign Investment Promotion Agency of Bosnia and Herzegovina www.fipa.gov.ba
Directorate of European Integration www.dei.gov.ba
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