The Montenegrin economy has shown positive trends in economic activity at the start of this year, with growth aligning with the Ministry of Finance’s projections, stated Minister Novica Vuković. “Real economic growth for the first quarter reached 2.5 percent, surpassing growth rates in both the EU and the eurozone,” Vuković noted during a consultative session focused on Gross Domestic Product (GDP) Growth and Financial Sustainability at the Parliamentary Committee on Economy, Finance, and Budget.

In comparison, he mentioned that the EU economy has experienced an annual growth rate of 1.6 percent.

“This aligns with the Ministry of Finance’s expectations, especially as both global and European economies face a slowdown. The International Monetary Fund (IMF) has downgraded growth forecasts for several nations in its latest report. Montenegro, due to its strong trade and investment connections with the EU and regional countries, must also account for these global uncertainties,” explained Vuković.

Examining the growth structure, he highlighted significant increases in investments and private consumption, which indicate that the economic fundamentals remain stable and robust, ensuring macroeconomic stability.

“Current liabilities are financed through current revenue streams. Sustainable growth is supported by a blend of fiscal reforms, tackling the shadow economy, and enhancing budget revenues,” Vuković added.

He also reported a 3.4 percent rise in tourism arrivals during the first four months.

“The job market is exceptionally vibrant. For the first time, the unemployment rate is in single digits, standing at 9.91 percent, marking the lowest level recorded by the Employment Service (ZZZ),” noted Vuković.

As per his statements, the average net salary has surpassed one thousand euros and is growing at a rate of 22 percent.

“The net inflow of foreign direct investment (FDI) saw a growth of four percent in the initial quarter. The banking sector remains stable, liquid, and highly profitable,” said Vuković.

He clarified that inflation has significantly decelerated under this Government’s term, dropping from a record 13 percent in 2022 to nine percent in 2023, while it was 2.2 percent the previous year.

Gordana Radojević, President of the Society of Statisticians and Demographers (DSD), indicated that trends suggest the current economic conditions are not particularly favorable.

“Our society has become overly reliant on foreign individuals or those willing to work here. The influx of foreigners surged due to the war in Ukraine, leading to an economic boom. However, as this number declined, so did economic activity. This presents a demographic challenge,” explained Radojević.

She remarked that economic activity has been declining not just in the first quarter but since the second quarter of the previous year.

“All critical sectors of the economy, including agriculture, finance, and real estate, are experiencing downturns, though some services are still growing,” Radojević noted.

She pointed out that prices increased cumulatively by 33 percent since 2019, compared to 22 percent in the EU, pointing to similar global factors, albeit with a notable spike in electricity prices.

“Prices of food and non-alcoholic beverages have surged by 50 percent since 2019, compared to 33 percent in the EU,” stated Radojević.

Miloš Vuković, CEO of Fidelity Consulting, reminded that the European Commission predicted GDP growth would be significantly lower than the Ministry of Finance’s projection.

“We anticipate a reduction in tax expenditures, noticeable in service contracts, but this alone will not suffice. Montenegro’s growth this year is expected to lag behind that of other aspiring EU member states,” said Miloš Vuković.

He added that although consumption was inflated due to rising mandatory costs resulting in substantial loans by citizens, Montenegro currently holds the lowest growth rate.

“If that consumption ceases, we might find ourselves in a recession,” remarked Miloš Vuković.

He also commented that projections suggest Montenegro’s growth rate will be the lowest next year.

“Last year, we recorded a growth rate of 4.4 percent in the first quarter and three percent annually. This year, the first quarter growth was 2.5 percent, indicating it will likely drop below two percent annually,” noted Miloš Vuković.

“All documents indicate a growth forecast of 4.8 percent,” he continued.

“To make this assessment effective, a revision of the Fiscal Strategy and other documents will be necessary. The economy appears to be growing from a lower growth scenario outlined in the Fiscal Strategy,” he added.

As per him, economic activity has drastically slowed down.

MP Tonći Janović from the Europe Now Movement (PES) expressed his concern that anxiety over the country’s economic state seems contrived for political gain, and he hopes that citizens remember their conditions prior to the Europe Now 1 and 2 programs.

“Did thematic sessions convene when the average salary increased by only 40 euros in a decade, while the minimum wage stood at 222 euros, and pensioners received a scant 145 euros, with pensions only rising 17 euros over ten years, all while public debt escalated from 1.4 billion in 2011 to 4.4 billion in 2020? They did not, which I believe is a missed opportunity,” stated Janović.

He elaborated that the state was unable to support its citizens’ low standard of living from current revenues, prompting increased debt. This wouldn’t have been problematic had the money been invested into infrastructure, but instead, it was largely used to cover budget gaps.

“Even then, there was no reason for thematic sessions,” he reiterated.

Janović recounted that the previous administration implemented a tax reform in 2014 which taxed SIM cards, electricity meters, and cable connections, while the 2017 fiscal strategy raised the general value-added tax (VAT) from 17 percent to 21 percent and reduced public sector salaries.

“Contrarily, this current government has allocated every cent of its debt towards repaying past debts and pursuing capital projects, successfully reducing public debt from 110 percent to about 65 percent and boosting the economy,” asserted Janović, also noting two upgrades in Montenegro’s credit rating during Prime Minister Milojko Spajić’s term.

However, he argued that retail chains in Montenegro raised prices without justifiable reasons, driven by a desire for higher profits, even though this issue extends throughout the entire region.

“Last year, the top five retail chains in Montenegro generated revenues of 1.1 billion euros, marking an 8.5 percent increase, while total turnover rose to 36.5 million or 11.6 percent more. So they aren’t suffering losses, and this issue warrants a discussion,” Janović stated.

MP Miloš Konatar from the Civic Movement URA remarked that Montenegro’s fiscal strategy is based on an anticipated growth of 4.8 percent; however, projections suggest only 2.3 percent growth, raising alarms.

“Statistics do not support the notion that people are living better than ever,” Konatar remarked, emphasizing the Pension Fund’s current deficit of 155 million euros.

He insisted that we cannot ignore current issues, as they will inevitably affect future generations.

“It’s crucial to stay attuned to current events because the repercussions of poor decisions will catch up with us, and happiness will be elusive,” Konatar called for unity beyond party lines to find shared solutions.

DPS MP Nikola Milović cautioned that the foundational assumptions were flawed—assuming economic growth at 4.8 percent when it would tail off around two percent.

“This illustrates the deceleration of the Montenegrin economy. One cannot expect to live better while working less. Such a formula yields disastrous results,” Milović emphasized.

He expressed concern that citizens’ hopes for continued wage rises are being unduly encouraged, which he stated is unrealistic.

“We are becoming stagnant, raising questions about our development capabilities,” Milović noted.

He challenged that Montenegro’s economy requires painful cuts but cautioned that failure to act could lead to greater debt issues and an inability to repay loans, a scenario anticipated by 2027 or 2028.

“We need to identify the core pillars of our economy, bolster them, and base our future development on that,” urged Milović.

The Deputy Prime Minister for Economic Policy and Minister of Economic Development, Nik Đeljošaj, was invited to participate in the hearing but did not attend.

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