Monday, April 21, 2025
25.9 C
Podgorica
22 C
Budva
22 C
Kotor
17.6 C
Cetinje
HomeBusinessEBRD forecasts: The Montenegrin economy will slow down due to higher prices...

EBRD forecasts: The Montenegrin economy will slow down due to higher prices in tourism and reconstructions and

Published on

spot_img

EBRD Predictions: Montenegro’s Economy to Decelerate Amid Rising Tourism and Reconstruction Costs


1. Mar 2025 10:45

The Montenegrin economy is projected to experience a deceleration, with growth rates of 2.9% and 3% anticipated in 2026. This is attributed to rising costs in the tourism sector and the ongoing reconstruction of the Termo Paljevlja plant in Pljevlja, according to a recent report by the European Bank for Reconstruction and Development (EBRD).

“The economic growth forecast for Montenegro in 2024 is estimated to be lower (3.1%) compared to the expectations set in September of the previous year (3.8%). The slowdown, following robust growth in 2022 and 2023, reflects a notable decline in the tourism sector after a record-breaking season in 2023,” states the latest EBRD forecasts.

The growth expected in 2024 is anticipated to be driven by private consumption and gross fixed capital investments, bolstered by an expansive fiscal policy, rising wages, growth in retail, the introduction of caps on retail and wholesale margins for specific products, and ambitious infrastructure projects.

“Nonetheless, net exports have declined, in part due to a substantial drop in tourism following the peak year of 2023, influenced by diminished arrivals from Russia and Ukraine. Inflation has significantly decreased from a high of 17.5% in November 2022 to 2.1% in December 2024,” reports the EBRD.

GDP growth is expected to further decrease to 2.9% in 2025 and 3% in 2026. “Salary reconstruction could curtail demand, which accounts for about half of electricity consumption, leading to a significant rise in electricity imports,” notes the report.

“Conversely, increases in wages may promote higher consumption growth,” the report adds.

Regional Growth Remains Steady Amid Weak EU Demand

The growth rate in the Western Balkans has remained stable, around 3.5% in 2024, maintaining the 2023 levels. This stability is due to lower external demand from the EU, the region’s most significant trading partner, as goods exports have continued to be sluggish. However, domestic factors such as private consumption, wage growth, and increased public investment have partially offset this negative impact, according to the EBRD report.

Tourism has remained robust, particularly in Albania and Kosovo (including visits from the Western European Diaspora), and to a slightly lesser extent in Montenegro. A modest growth of 3.6% is forecasted for 2025 and 2026.

The EBRD warns of substantial risks that persist, including ongoing weak external demand from the eurozone and potential disruptions in global trade, partly spurred by the policies of the new US administration. Countries like Serbia, Bosnia and Herzegovina, and Northern Macedonia, characterized by strong export-oriented manufacturing sectors, could encounter indirect negative impacts through their exports to the eurozone (and to a lesser degree, China) if American tariffs increase.

“In contrast, economies reliant on tourism, such as Albania and Montenegro, as well as those depending on remittances, may experience more moderate impacts, primarily due to potential decreases in tourism from EU nations as household incomes grow more slowly. Additional risks to growth arise from a tightening labor market and wage inflation, which could exacerbate inflationary pressures while also negatively affecting competitiveness and future foreign direct investment inflows,” the EBRD emphasizes.



Latest articles

With the Law on Self-Determination, Montenegro sends a clear message that it does not fall under the influence of the global right

Montenegro's Self-Determination Law Signals Defiance Against Global Right Influence ...

The Government has allocated almost 72,8 million euros for the maintenance, reconstruction and construction of roads.

The Government Allocates Nearly 72.8 Million Euros for Road Maintenance, Reconstruction, and Construction....

Stojanović sentenced to three years and eight months in prison for cigarette smuggling

Stojanović Receives Three Years and Eight Months in Prison for Cigarette Smuggling...

Defense Minister Helez proposed to Rutte that BiH immediately become a conditional member of NATO

Defense Minister Helez Advocates for BiH's Immediate Conditional NATO Membership to Rutte...

More like this

Former Minister of Science Sanja Damjanovic: SEEIIST chance that must not be lost

Former Science Minister Sanja Damjanovic: The Imperative of Seizing the SEEIIST Opportunity...

The EU and the UAE initiate negotiations on the Free Trade Agreement, the happiest Government of Montenegro

EU and UAE Launch Free Trade Agreement Talks: Montenegro's Government Celebrates...

What did Montenegro give in a multi-deceen lease

What Did Montenegro Contribute in a Multi-Decade Lease?Sure! Here's the rewritten content with the...