June 18, 2014 / 5:40 PM / 3 years ago

UPDATE 1-Floods to reverse Bosnian economic growth this year

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SARAJEVO, June 18 (Reuters) - Devastating floods in May will cause economic output in Bosnia to shrink by 1.1 percent this year instead of growing 2.2 percent as previously hoped, an international team assessing the damage said on Wednesday.

“The growth in GDP is going to come down from 2.2 (percent) before, to a decrease of 1.1 (percent),” said Ricardo Zapata Marti, coordinator of a team comprising officials from the Bosnian government, the European Union, United Nations and World Bank.

The team said the damage inflicted on Bosnia by the heaviest rainfall in the Balkans in more than a century was in the region of 4 billion Bosnian marka ($2.7 billion), or 18.5 percent of Bosnia’s gross domestic product (GDP).

Marti said the final report will be completed in the next two weeks in order to verify data related to the key sectors of agriculture, housing and jobs.

He said agricultural production, which accounts for 6.6 percent of GDP, will be hit hard.

“This overall negative growth will generate an increase in the fiscal deficit, which is now projected to grow from 3 to 4.5 percent of GDP,” Marti told a news conference.

But he said that Bosnia may return to rapid growth again if the recovery and reconstruction process starts promptly. He expected a boom in the construction sector and the creation of new jobs in a country where 46 percent of workers are registered as unemployed.

The European Union has already re-allocated 40 million euros from its pre-accession funds for Bosnia to projects designed to ease the impact of the flooding. Bosnia’s progress to accession was blocked last year by domestic political disagreement.

The report on the damage and recovery needs will serve as a basis for an international donors conference, scheduled in July for Bosnia and Serbia, which were worst hit by the floods. (Reporting by Daria Sito-Sucic; Editing by Robin Pomeroy and Keiron Henderson)

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