The European Bank for Reconstruction and Development (EBRD) anticipates a growth of 3.5 percent in the Montenegrin economy for this year, revising its earlier forecast from September down by 0.2 percentage points.

“Following an unexpected growth of 6 percent in 2023, it is forecasted that economic expansion will moderate to 3.5 percent in 2024. This slowdown is attributed to a higher base and the adverse effects of drought on hydropower. Growth is expected to be supported by private consumption and investments from the cost side, alongside the services and construction sectors from the production side,” noted the EBRD in its regional economic outlook.

According to the Montenegro section of the report, retail experienced double-digit growth in the first two months of 2024 compared to the same period last year, fueled by fiscal expansion and substantial wage increases, although industrial production saw a decline, particularly in electricity generation.

Inflation trends declined until February 2024 but spiked to 5.5 percent in March relative to the same timeframe last year, despite previous anti-inflation measures that affected roughly 150 products, as reported by the EBRD.

Regarding public debt, the EBRD highlights that to meet due liabilities in March 2024, a new international bond was issued, maturing in seven years, worth 750 million US dollars, with an effective interest rate of 7.25 percent.

The report indicates that in March, the credit rating agency Standard and Poor’s (S&P) upgraded its outlook from stable to positive while maintaining a rating of B, reflecting the country’s fiscal and payment balance over the past year.

“In 2025, further growth is projected at 2.9 percent, considering that the Pljevlja thermal power plant, which currently generates approximately 40 percent of the nation’s electricity, is slated for a long-term overhaul, which may result in decreased electricity production and increased energy imports,” the report states.

The EBRD’s regional economic forecast suggests a slowdown in the Western Balkans to 2.5 percent in 2023, down from 3.4 percent in 2022, primarily due to persistently high inflation that dampens domestic demand and constrains EU demand.