In the first quarter of 2024, Montenegro’s budget posted a deficit of EUR 5 million, even as revenues saw a boost. The country experienced a 31.2% decline in exports, reduced investments due to lower spending on real estate, and a 19.1% drop in tourist numbers. On the other hand, employment and wages have risen. These insights are part of the April Monthly Macroeconomic Report from the Directorate for Macroeconomic and Fiscal Analysis and Projections of the Ministry of Finance.
The report highlights that from January to March 2024, the budget deficit reached EUR 4.9 million, which is 0.1% of the Gross Domestic Product (GDP).
Budget revenues for the first quarter of 2024 amounted to EUR 578.5 million, representing 8.2% of the estimated GDP. Compared to the planned figures, actual revenues exceeded expectations by EUR 45.6 million, or 8.6%, and were EUR 36 million higher on an annual basis, marking a 6.6% increase.
“Excluding one-time revenues, compared to the first quarter of 2023, revenues increased by EUR 99.8 million, or 21%,” the report states.
From January to March 2024, budget expenditures totaled EUR 583.4 million, or 8.3% of the estimated GDP, which is EUR 72.1 million less than planned (an 11.8% decrease).
“Compared to the same period in 2023, expenditures increased by EUR 104.2 million, or 21.7%,” noted the Ministry of Finance.
The Ministry explained that the rise in expenditures was largely driven by increased allocations for pensions and disability insurance.
“Primarily, this was due to the increase in the minimum pension and higher allocations for gross wages, following the adoption of sectoral collective agreements that raised salaries for public sector employees in 2023,” they noted.
Drop in electricity and aluminum exports
The first quarter of 2024 also saw a decline in foreign trade, with a 3.4% decrease compared to the same period in 2023. This was mainly due to a significant reduction in the export of electricity and aluminum.
“Exports, valued at EUR 150.8 million, fell by 31.2%, driven by declines in electricity exports (down 79%) and aluminum exports (down 53.2%) compared to the first quarter of 2023. The coverage of imports by goods exports stands at 17.6%, down from 26.5% in the same period of 2023. Goods imports, valued at EUR 858.8 million, grew at a slower pace of 3.9%, primarily due to lower imports of metal industry products, while imports for personal consumption continued to rise. The main import categories were machinery and transport equipment (EUR 220.5 million, up by 11.2%) and food products (EUR 158.6 million, up by 3.1%),” the report detailed.
Preliminary data reveals that from January to March 2024, the net inflow of foreign direct investments (FDI) amounted to EUR 117.6 million, a decrease of 1.1% compared to the previous year.
“Total FDI inflow stood at EUR 208.8 million, down by 0.8%, primarily due to a reduction in real estate investments (down 11%). Investments in companies and banks, as well as inter-company debt investments, increased by 40.5% and 6.2%, respectively. Total FDI outflow in the first quarter of 2024 was EUR 91.3 million, a yearly decline of 0.3%. The largest shares of FDI inflow came from Serbia (approximately EUR 40 million), the Russian Federation (EUR 37.8 million), and Turkey (EUR 20.7 million), accounting for 47.1% of the total inflow,” the report noted.
The number of overnight stays by domestic and foreign tourists in the first quarter of 2024 totaled 1,318,915, showing an annual decrease of 19.1%, according to the Monthly Macroeconomic Report.
“Most overnight stays were recorded by tourists from Russia (37.8%), Serbia (13.3%), Turkey (8.3%), Bosnia and Herzegovina (4.4%), and Ukraine (4.3%),” the report indicates.
Tourism revenues dropped by 20.6%, while passenger transport at airports recorded a 5.0% annual increase in the first three months of 2024, according to the report.
Industrial production increases, electricity production declines
The services sector turnover index rose by 6.8% on an annual basis in the first three months.
“Retail trade turnover grew by 10.9% in the first quarter of 2024, while industrial production increased by 4.9%, driven by a 23.0% rise in the manufacturing industry and a 19.7% rise in the mining and quarrying sector. Meanwhile, electricity production saw an annual decline of 10.5%. Construction activity increased in the first quarter of 2024, with the value of construction works rising by 3.4% compared to the same quarter in 2023,” the report states.
Inflation at 4.7% in Q1, clothing, footwear and restaurant prices see largest increases
The average inflation rate for the first quarter of 2024 was 4.7%.
“The highest annual price increases for consumers were seen in clothing and footwear at 13.5%, which contributed most to overall inflation (1.04 percentage points), and prices in the ‘Restaurants and Hotels’ category, also up by 13.5%,” the report notes.
In April, annual inflation was 5.4%, while monthly prices remained stable.
“Food prices slightly decreased by 0.4% in April compared to March, mainly due to margin restrictions in retail chains. Basic food items, such as ‘Milk, cheese, and eggs’ and ‘Oils and fats’, saw monthly price decreases of 1.9% and 1.6%, respectively,” the document adds.
More jobs, rising wages
The Macroeconomic Report also highlights continued positive trends in the labor market and rising average wages.
“The number of employed persons in the first three months of 2024 was 248,900, an increase of 7.1% compared to the same period in 2023. The registered unemployment rate by the Employment Agency of Montenegro (ZZZCG) in March 2024 was 12.9%, a decrease of 2.86 percentage points annually. The average net salary in the first three months of 2024 increased by 6.8%, reaching EUR 822. The average pension in March, including adjustments, was EUR 511.18, representing an annual increase of 36.6%,” the report states.
Loans reach EUR 4.26 billion, savings at EUR 5.33 billion
According to data from the Central Bank of Montenegro (CBCG), banks recorded a profit of EUR 38.8 million in March, which is 24.7% higher than the same month in 2023.
Total loans amounted to EUR 4.26 billion at the end of March, showing an 11% annual increase.
“Loans to businesses increased by 5.7%, while loans to households grew by 10.3%. New loans in the first quarter of 2024 amounted to EUR 367.3 million (an annual growth of 33%), of which loans to businesses totaled EUR 162.6 million, while individuals borrowed EUR 183.4 million,” the report notes.
At the end of March, citizens held EUR 5.33 billion in bank savings, reflecting a 2.8% annual growth.
“In March 2024, there were 20,490 blocked debtors, with the total debt leading to account blockages amounting to EUR 1.22 billion, a 17.3% annual increase,” the report concludes.
