The country receives one of the western Balkans’ largest investment inflows relative to its economy. But increasingly little of that money finances companies, technology or export capacity.
Montenegro has no shortage of foreign capital. The problem is what the money buys.
Net foreign direct investment rose 8 per cent in 2025 to €530.7mn, according to a report by the Montenegrin Foreign Investors Council. Total inflows exceeded €1bn, equivalent to about 7.2 per cent of gross domestic product — one of the highest ratios in the western Balkans.
Such figures might suggest that foreign investors are financing a rapid expansion of Montenegro’s productive capacity. In practice, almost half of the inflow went into real estate.
Property accounted for 48.9 per cent of FDI in 2025. A further 31.4 per cent took the form of debt between related companies. Investment in companies and banks — the category most closely associated with greenfield projects and expansion of the real economy — represented just 13 per cent.
The transformation over the past decade has been striking. In 2015, companies and banks received 46.1 per cent of foreign investment, while property attracted less than 19 per cent. Productive investment has since fallen 62 per cent. Real-estate investment is 252 per cent higher.
Montenegro has therefore become more successful at attracting foreign money while becoming less successful at converting it into factories, technology, financial institutions and export businesses.
Property investment is not economically irrelevant. Foreign demand has helped finance construction, raised government revenue and supported the development of the Adriatic coast. Large projects such as Porto Montenegro, Portonovi and Luštica Bay have upgraded infrastructure and established the country as a luxury tourism destination.
But buying an apartment or villa is different from building an export company. Property transactions generate an immediate inflow, yet their longer-term effects on productivity, knowledge transfer and stable employment are limited. They can also push up housing costs and commercial rents, weakening the competitiveness of local businesses and the living standards of residents.
Intercompany lending, the second-largest component of FDI, should also be interpreted cautiously. Such financing may support legitimate business expansion, but it does not necessarily represent fresh equity or a new investment project. It can instead reflect the funding arrangements of companies already operating in the country.
The headline FDI number consequently exaggerates how much new productive capacity Montenegro is acquiring.
The trend has persisted despite a modest recovery in company investment. Productive FDI increased 15 per cent in 2025, but this amounted to only €18mn because the starting point was so low. Net investment remained 32 per cent below its 2022 peak, and there were no large new projects comparable with those that drove the previous investment cycle.
This is not simply a failure of promotion. Property is attractive partly because it is easier to value and less exposed to the institutional weaknesses affecting long-term businesses.
An investor buying a coastal apartment does not need the same confidence in commercial courts, regulatory continuity or workforce skills as a manufacturer committing capital for 20 years. The latter must consider licensing delays, infrastructure, contract enforcement and whether future governments will apply the same rules.
The investors council identifies frequent policy changes, selective enforcement, lengthy court proceedings, slow public administration and shortages of qualified workers as important deterrents. These weaknesses help explain why Montenegro attracts capital into fixed assets but struggles to secure projects involving greater technology, complexity and export risk.
The composition of investment by country reinforces the pattern. Capital from Serbia, Russia and, increasingly, Turkey has been concentrated heavily in real estate. Investors from EU countries and the US have been more likely to finance industry and technology, but demand greater regulatory predictability and institutional security.
Montenegro’s approaching EU membership could alter those calculations. Accession would reduce some political and regulatory risk, provide access to European funding and make the country easier to integrate into cross-border supply chains.
But EU membership is not an investment policy in itself. Croatia continued to experience volatile FDI after joining the bloc, even as its investment structure gradually expanded beyond tourism and construction. Montenegro will still need credible institutions, better infrastructure and businesses capable of supplying international investors.
The more promising alternative to property is energy. The electricity cable to Italy has connected Montenegro more closely with the European market, while the Krnovo, Možura and Gvozd wind projects are expanding renewable capacity. A partnership between state power company EPCG and Abu Dhabi’s Masdar could eventually develop about 600MW of wind, solar and storage projects.
Energy investment has several advantages over property. It can reduce electricity imports, create export capacity and connect Montenegro with the European transition to lower-carbon power. Yet it must be accompanied by transparent concessions, credible environmental assessment and investment in the electricity grid if it is to avoid becoming another collection of isolated projects.
Digital infrastructure, agribusiness and transport offer further opportunities, particularly if EU programmes deliver the roughly €3bn of investment envisaged under the sustainable-investment initiative cited by the report.
The policy objective should not be to suppress property purchases. Montenegro’s landscape and tourism industry will continue to make real estate attractive. Instead, the government should stop treating every euro of FDI as equally valuable.
Investment incentives should favour projects that create skilled employment, introduce technology, purchase from domestic suppliers or generate exports. Authorities also need better sector-level data: the existing statistics make it difficult to identify ultimate owners or assess the economic contribution of individual investments.
Montenegro’s FDI figures demonstrate that the country can attract wealth. They do not yet show that it can use foreign capital to transform its economy.
The next phase of investment policy must be measured not by how much money crosses the border, but by what remains after it arrives.
