Oleg Filipović, an economic analyst, has recommended that the Montenegrin government consider implementing price controls to address potential inflation driven by psychological factors. In his recent interview with Radio Crne Gore, Filipović proposed two main strategies to tackle the issue.
The first strategy involves imposing limits on profit margins, while the second suggests direct actions such as a “Stop Inflation” initiative to set price caps on specific products. Filipović believes that while limiting profit margins is a reasonable approach, it may not be sufficient to curb inflation effectively. He argues that setting price limits on key products could be a more effective measure, though he also warned of the risk of creating artificial shortages.
Filipović highlighted the significant psychological impact on Montenegrin consumers and referred to the Fiscal Strategy and the Europe Now 2 program as factors influencing this situation.
“An increase in income often leads to higher prices due to psychological effects. Additionally, moving workers out of the gray labor market and creating a new one could be a factor. Employers aim to maximize profit, and the new Fiscal Strategy sets minimum wages at €600 for high school graduates and €800 for university graduates,” Filipović explained.
He also expressed concern that employers might adjust contracts to maintain a larger number of workers at the lower wage level to maximize their profits.
On the topic of funding shortfalls for the fiscal strategy, Filipović mentioned a deficit of approximately €250 million and questioned how the government plans to address this gap.
“There is a significant shortfall of about €250 million needed for the program and salary increases. The government intends to raise VAT in tourism and hospitality to 15%, as well as on gambling. The question is how these measures will impact the actual gains and the black market,” Filipović said.
He also raised concerns about the handling of various types of gambling and the potential for reduced reporting of stakes.
Filipović pointed out that any increase in wages might lead citizens to seek bank loans. He suggested that banks are likely to benefit from this trend, as consumer loans, particularly those below €10,000, are considered low-risk and profitable for financial institutions.
He mentioned the planned establishment of a Development Bank and suggested that it will be important to observe how the Central Bank and its regulatory body will respond, particularly in light of the current decline in interest rates.
Filipović stressed the separation of monetary and executive policies and indicated that it remains to be seen how the government will protect citizens. He noted that while citizens had hoped for a salary increase to €1,000 based on election promises, the Fiscal Strategy suggests a more modest increase.
“According to the Fiscal Strategy, the average wage increase is set at €600 for high school graduates and €800 for university graduates. The question remains: what about employees with only elementary education?” Filipović questioned.
He advised waiting to see the full implementation of the Fiscal Strategy before drawing conclusions and emphasized the importance of attracting investments and making the market more appealing.
