Protracted government formation may affect BiH’s growth

CBBH Governor Senad Softic has warned that a protracted government formation may slow down structural reforms needed to spur economic growth and thus affect the country’s rating and investment. Speaking in an interview with Reuters, Softic said that BiH economy should grow by about 3% in 2018/2019, while inflation should not exceed 2% until 2023. The CBBH Governor also ruled out the possibility the central bank to invest in local debt or finance local projects. He reminded that under the currency board arrangement the CBBH may only invest in securities of highly-rated euro area countries that guarantee adequate capitalization and liquidity. Reuters notes that the central bank has been under political pressure to divert foreign currency reserves it keeps at major foreign banks to support local firms. Softic also said that banks posted a pre-tax net profit of KM322.5m in 2018, similar to the previous year, while the NPL ratio fell to 9.4% in Q3’18.

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