The World Bank (WB) has approved a €56 million loan for Bosnia and Herzegovina as support to small and medium-sized enterprises affected by the coronavirus pandemic.

A loan contract was signed in Sarajevo on Monday by BiH Finance Minister Vjekoslav Bevanda and WB Country manager for BiH Emanuel Salinas with the loan earmarked for a project to support the recovery of micro, small and medium-sized enterprises (MSME) and relieve the effects of the coronavirus pandemic.

“60% of the loan or €33.6 million is intended for the BiH Federation entity and 40% or €22.4 million for the Republika Srpska entity. The loan terms are favourable, with a maturity of 15 years including a 5-year grace period,” Minister Bevanda explained.

The development banks in the two entities will secure support through special credit lines for companies affected by the crisis in the past year.

BiH's entire economy is faced with grave consequences because of the pandemic and the country has recorded a huge drop in GDP.

According to the country's statistical office, in the first half of 2020, GDP contracted by 3.7% compared to the same period in 2019. Indicators for all of 2020 are still not available, however, the trends in the second half of the year were even more unfavourable and it is estimated that the fall in GDP could be even higher.

At the same time, BiH has recorded a fall of 17.5% in exports, with imports having fallen at a similar rate.

Private consumption has fallen by 4%, however, public spending has increased by 0.5% which can be attributed to the higher costs of financing the health sector and the need to support the economy and bail it out during the first wave of the crisis.