Montenegro’s planned increase in the minimum wage to at least 1,000 euros from next year exceeds the country’s economic capacity and could widen its budget deficit, professor and economic analyst Vasilije Kostić said. He estimates the deficit could reach between 4.5% and 5.5% of gross domestic product (GDP), and warns that the pressure on public finances also puts the sustainability of pension payments at risk.
The comparison with Croatia highlights the scale of the planned rise against a much larger economy. Kostić puts Croatia’s economy at nearly 12 times the size of Montenegro’s, yet the Montenegrin minimum would nominally exceed the Croatian net amount. He considers that gap relevant to the debate over whether Montenegro’s planned wage level is aligned with the resources of its economy.
There are differing figures for Croatia’s net minimum wage. One comparison puts it at around 850 euros, while Kostić estimates it at around 800 euros or somewhat more, depending on where an employee lives. Those figures are not directly interchangeable with the gross amounts used in Croatia’s wage calculations.
For minimum-wage work in Croatia, gross salary I is slightly more than 1,050 euros, according to Kostić. The amount converts to net pay according to the local tax rate and personal allowance, so take-home pay can vary by location. The distinction matters when comparing the Croatian net figure with Montenegro’s announced minimum.
Employers’ total cost is higher than the gross salary I figure. Kostić puts Croatia’s gross salary II, which represents the employer’s cost, at slightly more than 1,220 euros. The different measures mean that the nominal comparison between Montenegro’s planned 1,000 euros and Croatian net wages does not use equivalent wage bases.
For comparing the two countries’ economic capacity, Kostić considers budget indicators relative to GDP more useful than absolute totals. He used 2025 figures, before the planned increase under discussion, when budget revenue amounted to about 35% of GDP in Croatia and 34% in Montenegro.
Budget expenditure in 2025 was about 38% of GDP in Croatia and 39% in Montenegro. The budget deficit was 3.8% of GDP in Croatia and 3.9% in Montenegro. Kostić regards the revenue, spending and deficit ratios as more relevant to the comparison of what the two states can afford than their absolute economic sizes.
Croatia is also a member of the European Union and has access to European funds, the single European market and the Union’s financial and development mechanisms. Kostić’s comparison therefore sets Montenegro’s planned wage floor against both a much larger economy and a country with access to those EU mechanisms, while noting the differences in wage calculation.
Deficit and pension risks
Kostić expects wages in Montenegro to grow considerably faster than the economy. In his assessment, that divergence would increase budget expenditure relative to revenue and lead to a larger deficit. His rough estimate for the deficit is 4.5% to 5.5% of GDP, above the 3.9% recorded in 2025.
How the state obtains any missing budget funds is central to the fiscal outlook, including the terms of financing and the interest rate. Kostić framed the approach he expects with the words: “It will hold — we will borrow, as before.” He warned that the key issue is whether that policy is sustainable.
Borrowing on new terms to repay old debts, Kostić cautioned, could leave Montenegro in an increasingly difficult fiscal position because of the inflationary nature of money. He also argued that a wage increase should be justified by the state’s economic capacity, warning that Montenegro is entering a period of considerable uncertainty.
As a response to the risk of economically unjustified decisions, Kostić said a law on social responsibility should be adopted to address their possible consequences. His concerns extend beyond the immediate effect of wage growth on the budget to obligations that depend on public finances, particularly pension payments.
He warned that improvisations in the pension system could threaten its sustainability. Pension payments are tied to the budget, making the risk to their delivery directly linked to the risk that the budget will not be realised as planned. Kostić described pensioners as having only “hope in the budget”.
Montenegro’s pensions are low and, in Kostić’s view, unjustifiably equalised. He considers that arrangement to devalue citizens’ contributions through work and encourage people to leave rather than stay. The pension system, in his account, also reflects how society treats people whose work contributed to its development.
Croatia, like many other countries, has a three-pillar pension system, which Kostić says is intended to reduce risks to its operation. He warned that Montenegro’s exposure through budget-funded pension payments makes the government’s handling of the deficit and borrowing needs important to the system’s sustainability.
