EBRD has presented today Transition Report 2014 on Montenegro.Growth returned to positive territory in 2013, with real GDP rising by 3.5 per cent, following the 2012 recession (when GDP fell by 2.5 per cent).
While an increase in external demand was the main growth driver over the last year – largely due to higher exports in electricity and a strong tourism season – domestic demand remained subdued. As a result, Montenegro’s economic recovery in 2013 had a limited impact on the labour market and the unemployment rate remained high at 19.5 per cent.
The activation of state loan guarantees for the aluminium producer, KAP, has weakened the government’s fiscal position and elevated the government deficit to an unplanned 3.2 per cent of GDP. Under the 2014 budget law, Montenegro plans to cut its deficit to below 2 per cent of GDP. This will be achieved by a combination of higher budget revenue from continued GDP growth, a one-year extension on the so-called crisis tax (15 per cent tax introduced in early 2013 on above-average salaries) and a freeze on wages and pensions until the end of 2014.
Over the past year, the government has introduced a number of business environment improvements, including a one-stop shop for permits, strict time limits for the issuance of approvals and a decrease in the number of procedures required for obtaining a permit. This has had a particularly beneficial impact on the real estate sector and has led to an upgrade on the EBRD’s market institutions score for this sector. These reforms are helping to maintain Montenegro’s relatively good standing on the World Bank Doing Business 2015 report, which places the country at 36th out of 189 countries for overall ease of doing business, six places up from a year ago. However, a planned €250 million hotel investment by a major foreign investor was delayed earlier this year, reportedly due to bureaucratic impediments.
Izvor: RTV Montenegro