INFLUENCE OF THE GLOBAL FINANCIAL CRISIS ON BOSNIA AND HERZEGOVINA WITH FOCUS ON THE BANKING SYSTEM
Keywords:Financial crisis, financial stability, commercial banks, regulation, supervision, crediting, Central Bank of BH, deficit, capital markets, interest rates, subsidizing, import, export, substation of imports, real sector, privatization, fiscal policy.
Goal of each responsible government is achieving of the financial stability as the basic precondition for the creation of the favorable environment for the development of the economy real sector. Global financial crisis has had an influence on Bosnia and Herzegovina (BH) as well as on its financial sector, even though it has not resulted in bank failures or liquidity problems. Preserving of the stability of the banking sector is mostly consequence of rigorous demands in terms of capitalization, interventions of the Central Bank of Bosnia and Herzegovina (CBBH), as well as of the way commercial banks in BH do business, which was mostly traditional banking without dealing with speculative-related businesses. Still, financial crisis has left indirect consequences in terms of more difficult access to capital markets, which resulted in toughening of conditions for obtaining of loans and increase of interest rates. This change of crediting conditions will have the largest impact on the real sector of BH economy, which, in 2009, will face large problems in the process of finding the fresh capital for project funding, as well as with the servicing of the existing loans which became more expensive due to interest rates increase. In the end, all this can result in decreased GDP growth rate, which will have the negative impact on two existing macroeconomic indicators, which already have negative prefix: foreign trade deficit and unemployment rate, which is one of the largest in the region. Considering the global economic slowdown, we are facing the situation in which three basic sources of the foreign trade deficit financing (FDI, remittances of BH citizens living abroad and loans) could be reduced. Although it has successfully passed the first test of trust, BH banking sector, by itself, is not sufficient for overcoming of the crisis and creation of preconditions for continuation of growth of BH economy. There is the potential in the real sector, but in order to use this potential to the maximum, it is required for all levels of authorities to take adequate measures, which will make possible for BH economy to survive and which will create necessary preconditions for its growth at the time when the global economic cycle takes upward trend. Unfortunately, BH economy has been facing large problems even before the global economic crisis broke out, and the time has not been an ally for BH authorities. Some of measures, which have to be implemented right away, are incentives for development of domains in standardization and certification, substitution of import in sectors where we have potential, subsidies for food production, shifting from raw material oriented export towards the finished product export, development of sectors with big potential (energy sector), continuation of the privatization process, responsible fiscal policy, as well as creation of the adequate social policy. In order to create at least a part of stated recommendations, BH needs coordinated approach and creation of clear vision for development.
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