In 2015, Montenegro’s economy is expected to grow by between 3.0% and 4.7%, according to forecasts of the World Bank, the European Bank for Reconstruction and Development, and the International Monetary Fund. The economic growth will be fuelled by investments in infrastructure projects, especially the Bar-Boljare motorway, for which the Montenegrin government signed a 687 million euro loan deal with China’s Ex-Im Bank. Among the risk factors for the Montenegrin economic growth is the lower number of Russian tourists, who account for more than 20% of the total tourist arrivals.
Montenegro's economy experienced subdued growth in 2014 due to weak domestic demand, insufficient access to financing and drop in exports. Industrial production also fell and the privatisation of a number of large state-owned enterprises continued to lag behind. The tourism sector continued to be key for the country's economy, accounting for about 20% of the gross domestic product (GDP) and of the total employment. Montenegro managed to lower the unemployment levels but the limited company lending activity stalled earnings and weakened private consumption.
In March, Azmont Investments, controlled by Azeri state-owned oil company SOCAR, launched the construction of a luxury tourist resort on Montenegro's Adriatic coast, worth more than 500 million euro. The resort should be completed by 2016 and will open 6,500 jobs during the construction period and 1,200 afterwards.
In February, the Montenegrin government signed an 809.6 million euro deal with China Road and Bridge Corporation which together with China Communications Construction Company will build the Bar-Boljare motorway, part of Pan European Transport Corridor X.
In terms of business regulations, Montenegro was among the leaders in Southeast Europe (SEE) by ranking 36th in World Bank's Doing Business 2015 report. Montenegro was second among the SEE countries with the leader being Macedonia, which occupied the 30th position. Montenegro made dealing with construction permits substantially less costly by reducing the fee for the provision of utilities on construction land and eliminating the fee for obtaining urban development and technical requirements from the municipality, according to the report.
Montenegro's position in the Global Com-
petitiveness Report 2014-2015 published by the World Economic Forum remained unchanged at 67th out of 144 countries. The factors weakening Montenegro's competitiveness are insufficient access to financing, corruption and poor work ethic in the national labor force.
Remittances from emigrants are an important factor for Montenegro's economy, according to data of the World Bank. In 2014, they totaled 363.2 million euro, accounting for more than 10% of the country's GDP. The remittances grew by 4.2% in comparison to 2013 and by 32.6% in comparison to 2012. Large share of remittances to Montenegro come from Serbia. In 2014 their share was 22.9% of the total, followed by remittances from Turkey, accounting for 18.8% of the total sum.
The country's GDP totalled 3.38 billion euro, growing by a real 1.5% on the year in 2014, according to preliminary data of the Statistical Office of Montenegro (MONSTAT). Final consumption increased by 1.3% in value in 2014. Gross capital formation was up by 5.5%, contributing 20.0% to the GDP.
Industrial output was down by 11.4% in 2014, according to MONSTAT. The output of the electricity and gas supply sector fell the sharpest by 19.6% and the manufacturing sector declined by 6.7%. The mining sector expanded by 14.4%.
Industrial sales decreased by 7.6% in 2014, according to MONSTAT. Similar to the industrial output, the mining industry experienced a growth of 14.4% while the manufacturing, and the electricity and gas supply industries recorded drops of 10.5% and 9.0%, respectively.
Consumer prices in Montenegro turned to an annual average deflation of 0.7% in 2014 from 2.2% inflation a year earlier. In 2014, the highest annual decrease in consumer prices of 3.8% was registered in the communications sector, followed by recreation and culture with 2.6%, and food and non-alcoholic beverages with 1.4%. The highest increase in consumer prices was registered in alcoholic beverages and tobacco, health, and restaurants and hotels, of 3.8%, 2.3% and 0.6%, respectively.
Unemployment in Montenegro narrowed to 17.8% of the total labour force in 2014 from 19.5% a year earlier, according to data of MONSTAT.
The employed population aged 15 years and older was 216,300 people in 2014, up by 7.1%. The youth (population aged 15-24) unemployment rate was down to 35.9%, compared to 41.8% in the previous year.
Loans to the non-government sector totalled 1.84 billion euro as of end-2014, down by 1.1% y/y, according to Central bank of Montenegro (CBCG). Household loans grew by 1.5% to 894 million euro, while loans to non-financial corporations fell by 3.9% to 976 million euro.
The gross external debt increased, totalling 1.56 billion euro at the end of December 2014, which was 46.0% of the projected full-year GDP, according to CBCG. It widened by 9.0%, or 129 million euro compared to December 2013.
The current account turned to a deficit of 238.3 million euro in the fourth quarter of 2014 from a surplus of 165.0 million euro in the third quarter of 2014, according to central bank statistics data.
The trade deficit stood at 1.45 billion euro in 2014, compared to 1.398 billion euro in 2013, according to MONSTAT.
Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2015