Montenegro, Strong income growth masks fiscal weaknesses

“Russia’s war in Ukraine has significant consequences for the Montenegrin economy. Higher global food and energy prices contributed to record high inflation of nearly 17% in October. At the same time, citizens of Ukraine and Russia who applied for temporary residence helped the growth of domestic demand and the inflow of foreign currency. Borrowing costs have risen sharply, and access to international capital markets may be limited for a long time. The current account deficit is expected to increase this year due to high import prices, and it is likely to remain at a high level,” sad the International Monetary Fund (IMF) team led by Srikant Seshadri after visiting Montenegro.

“During 2023, growth is expected to weaken. Private consumption, a further recovery in tourism and strong credit growth contributed to real GDP growth of 10% at an annual level during the first half of 2022. However, it is expected that this impulse will slow down in the coming years, as these effects weaken, and higher prices will affect the consumption of the population”, said Srikant Seshadri.

Weak growth at the global level could also negatively affect tourism next year, he pointed out, local media reports.

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