Economic and Political Overview

flag Montenegro Montenegro: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

Economic Indicators

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 the first half of 2023, there was a 6.6% year-on-year growth in real GDP, primarily fueled by robust private consumption. This surge was attributed to rising real wages, employment rates, household borrowing, and a highly successful tourism season. For the year as a whole, the Central Bank estimated growth at 6%, as tourism surpassed 2019 levels and the inflow of migrants continued to support private consumption. In January 2024, the Montenegrin government announced its aim to achieve an average annual economic growth of 3.2% from 2024 to 2026, with domestic demand being the main driving force behind this growth, while elevated inflation, tighter financing conditions, domestic political fragmentation, and weak external demand will represent headwinds.

Concerning public finances, during the first eight months of 2023, the budget execution outperformed the revised 2023 budget adopted in May, which aimed for a deficit of 3% of GDP. From January to August, there was a surplus amounting to 3% of GDP, driven by lower-than-expected spending, particularly on capital investment, and higher-than-projected revenue, notably from VAT and excise taxes. Additionally, several one-off measures such as the economic citizenship program and the EU energy support grant contributed to this surplus. Persistent robust performance in tax revenue, temporary boosts in non-tax revenue, and lower-than-budgeted spending collectively contributed to the achievement of a surplus in public finances in 2023. However, it is anticipated that a fiscal deficit of approximately 3.5% of GDP will be recorded in 2024. However, due to a narrowing budget deficit and strong nominal GDP growth, the public debt-to-GDP ratio declined to 65.8% in 2023, from 72.1% one year earlier. Without any fiscal consolidation strategy, public debt is forecasted to increase over the forecast horizon, reaching 69.5% by 2025 (IMF). In 2023, inflation began to slow down, averaging 8.3% throughout the year. Significant rises in wages and social transfers also contributed to upward price pressures. It is anticipated that inflation will ease in 2024 and 2025, dropping to 4.3% and 2.6%, respectively. This is attributed to lower imported inflation and a moderation in domestic demand. Montenegro officially submitted its application to join the EU on December 15, 2008, with membership negotiations commencing on June 29, 2012. As of now, 33 negotiating chapters have been opened, three of which have been provisionally closed. As per the IMF recommendations, enhancing infrastructure connectivity, promoting tourism in the Northern region, and expanding into niche tourism markets can diversify Montenegro's tourism sectors. Moreover, harnessing its natural resources in hydro, solar, and wind power will boost energy production and exports, supporting the country's climate objectives. Improved public investment management practices are essential to prioritize high-return investments in both physical and digital infrastructure. Additionally, implementing effective policies to curb informality will foster a favorable environment for the SME sector, allowing it to capitalize on skilled migrant labor.

The resurgence of tourism and policy initiatives implemented in late 2021, such as eliminating mandatory health contributions and raising the non-taxable portion of wages, positively influenced job creation in 2022. This trend continued into 2023, resulting in a record-low unemployment rate of 13.5% in the second quarter. However, employment growth is projected to slow down in 2024-2025, attributed to weakening domestic and external demand, according to the EU Commission. The country maintains a large informal sector, while the labor force participation rate remains low. Moreover, Montenegro is one of the poorest countries in Europe: according to the latest data available by the OECD, approximately 20.3% of the population is at risk of poverty or social exclusion. The country’s GDP per capita was estimated at USD 27,027 in 2022 by the World Bank, half of the EU average.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 6.117.067.668.168.62
GDP (Constant Prices, Annual % Change) 6.14.53.73.23.0
GDP per Capita (USD) 9,82011,33912,29713,08813,827
General Government Gross Debt (in % of GDP) 72.165.867.669.572.0
Inflation Rate (%) n/a8.34.32.62.1
Current Account (billions USD) -0.81-0.76-0.87-0.94-1.04
Current Account (in % of GDP) -13.2-10.7-11.3-11.5-12.0

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

Montenegro has a labour force of 284,000 people out of its 619,000 population. Agriculture, which according to the latest data by the World Bank represents 6% of the GDP (roughly 60% livestock breeding and 40% cultivation) and 7% of the workforce, remains hampered by its outdated methods. Agricultural land accounts for 19% of the total land area (FAO), and the sector is dominated by small-scale family farms, with the average farm size being less than 5 hectares. In the coastal region which benefits from the Mediterranean climate, citrus and olive cultures are widespread, seasonable vegetables and tobacco can be found in the central parts, and the North benefits from the extensive sheep breeding. The main products exported are wine and beer, though the increased focus on tourism over the past decade has contributed to the waning of agriculture, increasing the country’s reliance on food imports. As Montenegro advances in the negotiations to join the EU, the country is working on the improvement of its agricultural sector as one of the EU pre-accession requirements.

Industry represents 13% of the country's GDP and employs 18% of the workforce. Its contribution to the economy has been declining in recent years. The steel and aluminium industry alone represents a good part of the country's exports and is expected to boost economic development. The manufacturing sector is still underdeveloped and accounts for only 4% of GDP. According to the national statistical institute, Montenegro's industrial output increased by 6.4%, driven by higher output in the utilities and mining sectors.

The tertiary sector contributes 61.5% to the GDP and employs almost three-quarters of the workforce (74%). Tourism is the third-largest industry and consumes around one-third of total investment. It alone provides 20% of the GDP (EU Commission). The sector has been in full expansion in recent years, especially on the Adriatic Coast: every year Montenegro welcomes three times as many visitors as its total population. In 2023, there were a total of 2,613,306 tourist arrivals and 16,389,279 overnight stays. Of the overall overnight stays, 96.3% were accounted for by foreign tourists, while domestic tourists contributed 3.7% of the total overnight stays (data Monstat). The country is seeking to improve its tourism infrastructure and develop its eco-tourism industry to exceed 30% of GDP by 2027. The government is trying to attract large foreign hotel chains that may provide hospitality standards similar to those in Europe. Montenegro's hotel infrastructure was underdeveloped, but with several huge infrastructure projects; the situation is beginning to change. On another hand, the county is also seeking to diversify its economy to be less dependent on tourism. Montenegro's banking sector is relatively small but growing rapidly and has undergone significant reform in recent years, with the government implementing a number of measures aimed at improving financial stability and increasing competition.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 7.4 18.8 73.8
Value Added (in % of GDP) 6.3 13.0 60.7
Value Added (Annual % Change) -0.2 -4.8 7.7

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 MUR 0.030.030.020.030.02

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
63,4/100
World Rank:
80
Regional Rank:
39

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

Montenegro is a small country open to foreign trade, which represents around 126% of its GDP (World Bank, latest data available). In order to become a WTO member, Montenegro has established major trade policy reforms, which include the elimination of import quotas, the reduction of import licenses and prohibitions, the streamlining of customs procedures, and the elimination of tariff and non-tariff barriers. According to 2022 figures by Monstat, the country mainly exports mineral products (33.8%), base metals and articles of base metal (29.1%), wood, articles of wood; basketware; charcoal; cork (6.9%), machinery and mechanical appliances; electrical equipment (5.8%), products of the chemical or allied industries (5.8%), prepared foodstuffs; beverages; and tobacco (4.2%); while it imports chiefly mineral products (18.7%), machinery and mechanical appliances; electrical equipment (12.6%), prepared foodstuffs; beverages; tobacco (10.9%), base metals and articles of base metal (9.8%), products of the chemical or allied industries (8.6%), vehicles and associated transport equipment (7.5%).

The European Union as a whole is the main trading partner, accounting for 30.3% of total exports and 44.2% of imports (data Monstat 2022). Serbia (21.3%), Bosnia-Herzegovina (12.9%), Slovenia (7.3%), Luxembourg (5.2%), and Italy (4.6%) are the main destinations of Montenegro’s exports, whereas imports come chiefly from Serbia (17.4%), Greece (8.2%), Germany (7.7%), Croatia (6.1%), and Italy (5.6%). Montenegro and the EU signed a Stabilisation and Association Agreement (SAA), which is expected to ultimately lead Montenegro to become a member of the EU.

The country has a structural trade deficit: in 2022, Montenegro exported USD 742 million worth of goods against USD 3.7 billion in imports (+44% and +25.3%, respectively); whereas exports of services (at USD 2.3 billion) were higher than imports (USD 1 billion – data WTO). In the same year, the trade deficit was estimated at 22.8% of the GDP (from 19.4% one year earlier - data World Bank). According to preliminary figures from Monstat, in 2023, Montenegro's trade deficit increased by 10%, reaching EUR 3.13 billion. Exports declined by 3.7% compared to the previous year, totaling EUR 674.3 million in 2023. Meanwhile, imports rose by 7.7% to EUR 3.8 billion.

 
Foreign Trade Indicators 20182019202020212022
Imports of Goods (million USD) 3,0102,9092,4042,9563,704
Exports of Goods (million USD) 472465419515742
Imports of Services (million USD) 7387685747551,018
Exports of Services (million USD) 1,8321,9047781,8822,370
Imports of Goods and Services (Annual % Change) 9.22.7-20.113.721.3
Exports of Goods and Services (Annual % Change) 6.95.8-47.681.922.7
Imports of Goods and Services (in % of GDP) 66.765.061.062.276.0
Exports of Goods and Services (in % of GDP) 42.943.826.042.852.7
Trade Balance (million USD) -2,414-2,311-1,873-2,262-2,788
Trade Balance (Including Service) (million USD) -1,319-1,176-1,669-1,135-1,436
Foreign Trade (in % of GDP) 109.6108.887.0105.0128.7

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2022
Serbia 21.3%
Switzerland 15.4%
Bosnia and Herzegovina 12.9%
Slovenia 7.3%
Luxembourg 5.2%
See More Countries 37.8%
Main Suppliers
(% of Imports)
2022
Serbia 17.4%
China 9.3%
Greece 8.3%
Germany 7.7%
Croatia 6.1%
See More Countries 51.2%

Source: Comtrade, Latest Available Data

 
 

Main Products

0.7 bn USD of products exported in 2022
Unwrought aluminiumUnwrought aluminium 24.4%
Electrical energyElectrical energy 24.3%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 4.7%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 3.9%
Wood sawn or chipped lengthwise, sliced or peeled,...Wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or end-jointed, of a thickness of > 6 mm 3.9%
See More Products 38.7%
3.7 bn USD of products imported in 2022
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 10.9%
Electrical energyElectrical energy 5.9%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 3.9%
Unwrought aluminiumUnwrought aluminium 3.2%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.1%
See More Products 73.0%

Source: Comtrade, Latest Available Data

 
 

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Main Services

Source: United Nations Statistics Division, Latest Available Data

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Sources of General Economic Information

Ministries
Ministry of Finance
Ministry of Foreign Affairs
Ministry of Labor and Social Welfare
Statistical Office
Statistical Office of Montenegro
Central Bank
Central Bank of Montenegro
Stock Exchange
Stock Exchange of Montenegro
Search Engines
Yusearch
Cruiser
Cafe Montenegro
Economic Portals
NewBalkan.com (en anglais)

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Political Outline

Current Political Leaders
President: Jakov MILATOVIC (since 20 May 2023)
Prime Minister: Milojko SPAJIC (since 31 October 2023)
Next Election Dates
Presidential: 2028
Legislatives: June 2027
Main Political Parties
The main political forces represented in the Parliament include:

- Europe Now Movement (PES!): centre, pro-Europeanism, it has the most seats in the parliament following the 2023 election
- Democratic Party of Socialists (DPS): centre-left, led by Milo Djukanovic, pro-Serbia
- Democratic Montenegro (DCG): big tent, pro-European
- Democratic People's Party (DNP): populism, Serbian–Montenegrin unionism
- Socialist People's Party (SNP): conservative
- New Serb Democracy (NSD): right-wing, conservative
- Democratic Union of Albanians (UDSH): pro-Albanian, right-wing
- Bosniak Party (BS): centre-right; supports the Bosnian community's interests
- United Reform Action (URA): social-liberalism, pro-European
- Social Democrats of Montenegro (SD): social-liberalism, pro-European
- Croatian Civic Initiative (HGI): centre-right; supports the Croatian community's interests
- United Montenegro (UCG): conservative.

Type of State
Montenegro is a multi-party parliamentary republic.
Executive Power
The President of the Republic of Montenegro is the Chief of State and is elected for a five-year term by direct universal suffrage (renewable once). He appoints the Prime Minister and two judges of the Constitutional Court. He can dissolve Parliament. The executive power is exercised by the government, which is headed by the Prime Minister.
Legislative Power
Legislative power is shared between the government and parliament. The parliament is unicameral: the Assembly (or Skupstina) has 81 members elected by proportional representation vote for a four-year term. The multiparty system encourages alliances and coalitions and does not allow one sole party to win the elections.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
104/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Partly Free
Political Freedom:
3/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of Montenegro, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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Latest Update: April 2024