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Montenegro’s business environment remains steady but moderately negative, new survey reveals

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A recent survey by the Chamber of Commerce (PKCG) reveals that Montenegro’s overall business environment remains moderately unfavorable, showing little change from the previous year.

The “Business Environment in Montenegro 2024” study aims to assess the current business climate, industry expectations for the upcoming year, and identify major barriers to business operations.

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According to the PKCG, global and local instability has led to a decline in the business environment rating, which was 3.05 before the COVID-19 pandemic—a level considered acceptable. The current rating stands at 2.37—indicating a moderately unfavorable environment—almost identical to last year’s rating of 2.41.

Regionally, businesses in central Montenegro express the least satisfaction with the business environment, while small companies report the lowest levels of satisfaction overall.

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PKCG President Nina Drakić noted that all areas surveyed were rated below the satisfactory mid-point score of three, highlighting a broad range of segments that need improvement.

“Access to finance received the lowest rating from businesses, whereas public procurement was rated the highest. The perception of the business climate has remained largely unchanged compared to last year, with only minor variations in average ratings across specific areas,” Drakić explained.

She also pointed out that businesses identified the top five barriers as: a shortage of skilled labor, the informal economy and unfair competition, liquidity issues (slow receivables), inefficient public administration, and high fiscal and parafiscal burdens.

PKCG Vice President Nikola Vujović provided insights into specific areas of concern.

“In terms of taxation, businesses rated VAT and excise duties as high, while corporate tax rates were deemed moderately high. Local taxes and fees for bailiffs received the lowest satisfaction ratings,” Vujović said.

Regarding the labor market, the minimum wage received the highest rating, while challenges include the legislative framework, vocational education, alignment of the workforce with educational profiles, and abuse of sick leave.

Infrastructure showed a slight improvement. However, the quality of railway infrastructure and Montenegro’s air connectivity received the lowest ratings. Conversely, water and electricity supply, along with internet quality, were rated more favorably.

“In the area of administration, customs were rated the best, but there is a general consensus that significant improvements are needed in public administration, particularly in transparency and efficiency. Most businesses believe that public administration reform is necessary,” Vujović added.

The survey also indicated that the rule of law rating remains nearly the same as last year, with a slight decline. Bankruptcy procedures, intellectual property rights, and other aspects were rated poorly, posing significant barriers to competitiveness and foreign investment.

The average time for customers to settle their obligations was rated the highest in the rule of law category.

Miljan Šestović, Director of the Research and Analysis Sector, highlighted that businesses rated financial sector digital services highly and expressed general satisfaction with their own digitalization efforts. However, there is considerable room for improvement in digital services provided by government and local authorities.

To address the very low ratings for access to financial resources, businesses suggest the creation of a guarantee fund.

“High interest rates on investment loans, leasing, working capital, collateral requirements, limited financing options, extensive documentation needed for loans, and slow approval processes contribute to the low rating for financial accessibility,” Šestović said.

Despite the current challenges, businesses are cautiously optimistic about improvements in the business environment by year-end, driven by positive expectations for results and overall performance.

Nearly two-thirds of respondents anticipate growth in revenue and profit, and a third expect to increase their workforce.

Half of the surveyed businesses believe personal incomes will rise.

Overall, businesses expect next year’s operating conditions to improve over the current ones, reflected in a rating of 2.95, indicating a satisfactory level of the business environment.

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