The European Bank for Reconstruction and Development (EBRD) has increased its growth forecast for the Montenegrin economy this year by 0.3 percentage points, projecting a growth rate of 3.8%.
According to the latest report reviewed by the Mina-business agency, the EBRD anticipates a growth rate of 2.9% for Montenegro in the coming year, consistent with its May predictions.
In a dedicated section of the report focusing on Montenegro, the EBRD highlighted that under the “Europe Now 2” program, salary increases are expected this year, alongside further pension hikes early next year.
The report states, “Growth is projected to reach 3.8% this year as the influx of tourists stabilizes. For the following year, a further slowdown to 2.9% is anticipated, largely due to the extended reconstruction of the Pljevlja Thermal Power Plant, which currently provides about 40% of the country’s electricity. This situation is likely to lead to a decline in electricity production and an increase in energy imports.”
After achieving growth rates of 6.4% in 2022 and 6% last year, the growth rate has decreased to 4.4% year-on-year in the first quarter of this year, supported by the services sector and industrial production.
“This has affected personal consumption and fixed investments on the expenditure side, which are the largest contributors,” stated the EBRD.
Consumption remains robust, with retail trade growing by 6.5% year-on-year in the first half of the year, driven by declining inflation and rising real wages and pensions.
The current account deficit widened by €170 million compared to the first quarter of last year, reaching €435 million, or 32.1% of Gross Domestic Product (GDP). The net inflow of Foreign Direct Investment (FDI) increased by 9.1% in the first five months compared to the same period last year.
Inflation has significantly decreased from its peak of 17.5% in November 2022 to 3.5% in July this year.
For the Western Balkan countries, the EBRD expects economic growth to rise from 2.5% last year to 3.4% this year, and further to 3.7% next year. Thanks to a strong tourist season, the organization has improved its forecast for Albania, while it noted strong investments and flexible fiscal and monetary policies for Serbia, and sustainable consumption growth for Montenegro.
The EBRD has slightly downgraded its growth forecast for the entire region it operates in by 0.2% to 2.8% this year, while next year it anticipates an acceleration to 3.5%, which is 0.1% lower than its May forecast.
