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Bosnian Central Bank Head Sees 'Full Economic Recovery' By 2012

Kemal Kozaric says economic development in Bosnia depends on politics.
Kemal Kozaric says economic development in Bosnia depends on politics.
SARAJEVO -- Bosnia-Herzegovina Central Bank Governor Kemal Kozaric says he expects the economy to grow by 3 percent in 2011, but a full recovery and a return to precrisis growth levels will not occur until next year, RFE/RL's Balkan Service reports.

Kozaric told RFE/RL that after contracting by 3.2 percent in 2009 during the global economic downturn, the economy returned to slight positive growth in 2010.

But he said a further improvement in economic growth was also dependent on the political situation in the country, particularly following inconclusive general elections in October.

"Our data show that last year the economy grew by 0.5 percent and it could be 3 percent this year, but it is still below 6 percent, which was our average annual growth before the crisis," Kozaric said.

Kozaric said the insistence of Bosnia's Serbian entity, the Republika Srpska, on more autonomy from the weak central government and Bosnian Croat demands to divide the Croat-Muslim Federation into two parts were complicating efforts to form a central government in Sarajevo and move closer to gaining a membership offer from the European Union.

Kozaric said that "unfortunately, we are witnessing the very slow formation of the government and we still don't know what its composition will be." He added that the authorities needed to concentrate on economic problems and avoid political squabbling.

Some economists disagree with the Central Bank's currency board arrangement, which ties Bosnia's marka to the euro at a fixed exchange rate. But Kozaric said the currency board must continue to be an "anchor" of economic stability.

He said inflation in Bosnia should be similar to eurozone levels at around 2.4 percent, "which should not create too many problems for the real [economic] sector."

Kozaric said Bosnia's B+ credit rating with a stable outlook by the Moody's and Standard and Poor's rating agencies was a good sign amid credit downgrades for other countries in the region.

"On the other hand, this is not a good rating because it is still very speculative...and is in the region of risky investment," he said.

Kozaric concluded, "That clearly says that reforms ahead of us have to be carried out faster so we can become attractive to investors."