CBBH revised upwards its nowcasting in the first quarter of 2021 6/8/2021 Tweet The Central Bank of Bosnia and Herzegovina (CBBH) estimates that the decline in real gross domestic product (GDP) in the first quarter of 2021, on an annual basis, amounted to 2.02% (Graph 1, below). In the second quarter of 2021, we expect inflationary pressures to rise, and an inflation rate of 1.83%, year-on-year for the quarter, and 0.24% year-on-year for the first half year. Graph 1: Nowcasting of Real GDP Annual Change Source: CBBH. Note: 1 standard deviation includes the interval of 68%, and 2 standard deviations include the interval of 95% reliability The nowcasting of real GDP for the fourth quarter of 2020 from March were almost identical to the subsequently published official data. Our current nowcasting in the first quarter of 2021 has been revised upwards by even 1.12 percentage points, and amounts to -2.02%. The confidence interval for real GDP projections one quarter in advance is unchanged, and we remain committed to a balanced distribution of possible risks of the average projection. In other words, we estimate with 68% confidence that the decline in economic activity in the first quarter of 2021 will be in the range of +/- 1.2 percentage points around our average projection. It was originally planned to publish nowcasting for the current and previous quarters at the beginning of the last month in the quarter. However, as we did not have all the observed indicators of higher frequencies for April until the beginning of June, and having in mind the effects of the pandemic shock on economic activity in the second quarter of 2020, we decided to publish the nowcasting in the second quarter, with the upcoming round of nowcasting. According to preliminary estimates, based on a very narrow set of official data, the annual growth of economic activity in the second quarter of 2021 could be significantly above 5%. Such an extraordinarily high growth rate is not inconceivable, given that the annual decline in economic activity in the first quarter of 2020 was almost 9%. However, until all the data, on which we make the nowcasting for April, are available, and at least basic ones for May, the nowcasting in the second quarter, would be unacceptably unreliable in the current circumstances. In the model, we still give equal chances that the nowcasting will be above, as well, as below the real value of real GDP and inflation. In the short run, however, we notice somewhat stronger factors that could result in underestimated nowcasting of real economic activity and inflation, than official data, when available. Positive pressures on real GDP are primarily related to the accelerated growth of the industrial sector and exports of goods. Our nowcasting of inflation in the second quarter is based on official data for April 2021, and data on expected movements of exogenous variables, such as food prices, oil and economic activity in the coming period. The nowcasting could be subject to significant upward revisions, in the event of extraordinary price shocks on energy, metals, and transportation costs. We use nowcasting of key macroeconomic variables in the CBBH until the publication of official statistics, or a new round of nowcasting. We plan to publish the results of the next regular round of the nowcasting of real GDP and inflation for the first half of August.
