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Expat Guide to Montenegro

Economy of Montenegro

Quick Facts

The economy of Montenegro is mostly a service based economy, currently in the process of economic transition.

Currency: Euro

Gross domestic product: 4.173 billion USD (2016) World Bank

GDP per capita: 6,701.00 USD (2016) World Bank

GNI per capita: 17,090 PPP dollars (2016) World Bank

Gross national income: 10.65 billion PPP dollars (2016) World Bank

GDP growth rate: 2.5% annual change (2016) World Bank

Internet users: 40.0% of the population (2011) World Bank

Overview

Montenegro's economy is transitioning to a market system. As of 2015, around 90% of Montenegrin state-owned companies have been privatized, including 100% of banking, telecommunications, and oil distribution.

In January 2007, Montenegro joined the World Bank and IMF, and in December 2011, the WTO. Montenegro began negotiations to join the EU in 2012, having met the conditions set down by the European Council, which called on Montenegro to take steps to fight corruption and organized crime.The government recognizes the need to remove impediments in order to remain competitive and open the economy to foreign investors.

Tourism, which accounts for roughly 20% of Montenegro’s GDP. In addition to tourism, energy and agriculture are considered two distinct pillars of the economy.

Tourism

In recent years tourism has become the biggest income earner for Montenegro. It accounts for roughly 20% of Montenegro’s GDP, brings in three times as many visitors as Montenegro’s total population every year.

Several new luxury tourism complexes are in various stages of development along the coast, and a number are being offered in connection with nearby boating and yachting facilities.

Foreign Investments

The biggest foreign investors in Montenegro are Russia, Italy, Cyprus, Denmark, Hungary and Serbia.

Net foreign direct investment in 2016 reached $755 million and investment per capita is one of the highest in Europe, due to a low corporate tax rate.Montenegro is currently planning major overhauls of its road and rail networks, and possible expansions of its air transportation system.

In 2014, the Government of Montenegro selected two Chinese companies to construct a 41 km-long section of the country’s highway system. Montenegro has recently explored further economic cooperation with China.

Renewable Energy

Only 20% of Montenegro’s hydropower potential is utilized. Montenegro plans to become a net energy exporter, and the construction of an underwater cable to Italy, which will be completed by 2018, will help meet its goal.

Economy Growth Forecast

Growth slowed down in 2016 to an estimated 2.1% after a growth of 3.2% in 2015, due to delays in highway construction, struggling industry, and only moderate levels of tourism. The labor market stagnated in 2016, despite the growth.

The economy is expected to grow by an average of 2.8% in 2017–19 on large public investments and personal consumption. Yet, once the large public investment impetus to growth slows down, the overall growth rate will decline too, further exposing existing weaknesses in fiscal and external balances. External imbalances are set to widen again to close to 21% of GDP, which, together with a further rise in the fiscal deficit and debt, would add to the already high vulnerability to external shocks. Inflation is projected at 2% in the period 2017–19.







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