Panorama econòmic

Economic indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

As the smallest country in the Balkans, Montenegro has a relatively fragile economy that is transitioning to a market system and is based on financial investments, especially in the energy and tourism sectors (private investment accounts for around one-fifth of GDP). After being severely hit by the COVID-19 pandemic, the country’s economy rebounded in 2021 when GDP grew by 13%. In 2022 Montenegro continued its positive trend, supported by a recovery of the tourism sector and by private consumption (partly influenced by the increase in wages and social transfers), with an estimated growth rate of 7.2% (IMF). According to the projections of the IMF, the economy is expected to continue to grow this year and the next, albeit at a slower pace (2.5% in 2023 and 3% in 2024) given the impact of the war in Ukraine on an import-dependent country like Montenegro. Moderate growth is due to the restriction of private consumption caused by the high level of inflation and stagnating investments.

Concerning public finances, Montenegro generally registers a budgetary deficit. At the end of 2021, the government adopted an ambitious plan (Europe Now) to boost economic recovery. This included the abolition of health contributions, an 80% increase in the minimum wage, the introduction of new social benefits and an ambitious public investment programme. The reform prompted a decrease in fiscal revenues in 2022 and a budget rebalance was adopted in September which foresaw an increase in expenditures by EUR 191 million (or 7.7%). For 2023, the budget deficit is expected to rise to 4.75% of GDP, as a result of state subsidies aimed at mitigating the effects of the crisis that affected the rise in the cost of living (S&P). The debt-to-GDP ratio decreased from 86.6% in 2021 to 74.4% in 2022 and is expected to follow a downward trend over the forecast horizon, stabilizing around 70%. To consolidate public accounts, the Minister of Finance has indicated that a tax reform will be implemented between 2022 and 2023. Planned measures include the introduction of an income tax for legal entities, as well as a progressive income tax for individuals while increasing the gross monthly tax-free salary to EUR 700. Another matter of concern is the fact that most of the public debt is denominated in USD and the country has an external trade deficit of almost one-fourth of its GDP. Therefore, Montenegro is vulnerable to a decline in external demand, and its high financing needs expose the country to potential changes in risk aversion and disruptions in global financial markets. In March 2023, the credit rating agency Standard & Poor's confirmed Montenegro's stable outlook while maintaining a B/B rating. In 2022, high global energy prices and stronger internal demand drove inflation to 12.8% (from 2.4% one year earlier). According to IMF projections, the inflation rate in 2023 will be around 9.2% before it sows to 4.5% in 2024, although uncertainty remains. One of Montenegro’s main objectives is to join the European Union: the country acquired the official status of a candidate for membership in December 2010. To advance in the accession negotiations, it should demonstrate significant progress in several domains, including the rule of law, the fight against corruption and organised crime.

Although decreasing in recent years, the unemployment rate has been historically high. Data from Monstat show that as of the third quarter of 2022, unemployment affected almost 13% of the labour force (39,000 people out of an active population of 300,700). The country maintains a large informal sector, whereas the labour force participation rate remains low. Moreover, Montenegro is one of the poorest countries in Europe: according to the latest data available by the European Commission, almost 24% of the population is at risk of poverty or social exclusion. The country’s GDP per capita was estimated at USD 26,032 in 2022 by the IMF, 52% lower than the EU average.

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