By Adnan Prekic – Podgorica
After the International Monetary Fund, the European Commission has also corrected the growth forecasts of the Montenegrin economy for this year. The European Commission predicts that the Montenegrin gross domestic product for this year will increase by two percent. In the forecasts that were published half a year ago, the European Commission expected a growth of 2.9 percent. The International Monetary Fund last month also corrected its estimates of the growth of the Montenegrin economy from 2.8% to 2.3 percent.
In the last report the European Commission has lowered the Montenegrin economy growth projection for this year and the next. The European Commission predicts that the Montenegrin gross domestic product of this year will increase by about two percent. They also reduced the growth forecast for next year from 3.6 percent, as it was projected in the spring of this year, to 3 percent. The European Commission is not expecting a significant recovery of Montenegrin economy until 2016, when the growth rate of gross domestic product should reach the level of 3.5 percent. Brussels also expects an increase of unemployment in Montenegro for this year to 19.3 percent, while in the next year it will drop to 18.6 percent.
In the report on Montenegro, it alleges that growth decelerated markedly in the first half of 2014, reflecting a sharp decline of exports but also the adjournment of some key major investment projects. Driven by domestic demand, economic activity is expected to regain some strength starting from 2015, while budget performance, already better than planned, would further improve.
The 2014 forecast has been revised downwards following delays – by one year at least– in the construction of the highway, of the thermal plant and of some large tourist resorts. Some minor preparatory works on the highway could start soon, but it is not expected to gain momentum before mid-2015. The new power plants projects are on hold waiting the conclusion of a new partnership agreement between the majority owners of the electric power company. Two large tourism resorts (Lustica and Plavi Horizonti) could resume their development in 2015. The renovated steel mill is expected to restart by the end of 2014 and to increase production gradually in the next two years, while the situation of the aluminium factor KAP remains uncertain, with some production likely to be maintained, according to a report.
Some growth of industrial production is expected in the last quarter of 2014, following the renovation of a steel factory and the higher aluminium prices in US dollars, the restart of construction after the summer break as well as some growth in the number of tourism in the late season. Yet, all these factors might prove insufficient to offset the weak performance of economic activity recorded in the second quarter. As a result, the annual average growth for 2014 is unlikely to reach more than 2%. For the outer years, an acceleration of growth is projected, driven by domestic demand according to a report.