WB provides technical assistance to the CBBH through the EU fiscal governance strengthening project

A technical mission consisting of the World Bank (WB) staff and consultants is in the Central Bank of Bosnia and Herzegovina (CBBH) this week, which, together with the CBBH staff, will be working on modelling productivity in Bosnia and Herzegovina.

Bosnia and Herzegovina is one of the few countries in the region that does not have a model assessment of productivity at the level of companies and industries. Aware that productivity assessment is a precondition for many other key inputs for public policy design, including the assessment of the price competitiveness of the domestic economy, the assessment of internal imbalances, which are crucial for the assessment of the equilibrium exchange rate, the precise assessment of the effects of the introduction of the CBAM, or the assessment of the potential for the development of regions in Bosnia and Herzegovina, the CBBH has defined a framework of technical assistance with the WB. Such activities are harmonised with the reporting requirements of candidate countries in the EU integration process in terms of trends, but they are also necessary for reporting on the planned effects of public policies and the effects of the implemented relevant reforms. Therefore, this technical assistance was funded by the EU grant to strengthen governance in the Western Balkans countries.

In addition to Bosnia and Herzegovina's interest in making such an analysis as a whole, and continuing to update it in the coming years, the CBBH is interested in calibrating its models for macroeconomic projections and estimates, including the assessment of potential gross domestic product and the GDP gap, based on productivity estimates. Bearing in mind that productivity at the corporate level shows a high level of correlation with the total factor productivity, we plan to develop a separate satellite model, which will be linked to the CBBH models for macroeconomic projections. The further upgrade of the models developed and used by the CBBH, and the results of which are regularly shared with the public, represents a significant contribution to the process of the EU integration of the country, provides useful information to economic policy makers when calibrating decisions within their competence, and supports and strengthens scientific and research activities in the country.

The focus of the mission will be on: the informing on the methods of model productivity assessment, using data at the level from business registers; decomposition of productivity and estimation of trends of the total factor and labour productivity, according to different characteristics of companies, such as size, age of company, associated industry, or type of ownership, and drivers of change in productivity. A special focus will be on the analysis of job creation and wages according to productivity distributions.

Initially, the CBBH will carry out the analysis on an anonymous sample of companies in Bosnia and Herzegovina. We are confident that the business community, as well as policymakers in BiH, will see the importance of such a continuous, comprehensive assessment of productivity and the factors that affect it, and we believe that we will receive full support for our plans to expand coverage to all companies in BiH. Once the coverage is complete, the CBBH is ready to support the relevant levels of authorities in creating policies concerning the business environment and the labour market.