The economic growth of Montenegro slowed in 2024 compared to 2023, according to the Center for Economic and European Studies (CEES). The center expressed hope for the swift adoption of this year’s state budget, given the upcoming debt repayments.
“It is concerning that the budget for this year has not yet been adopted, and the year began with temporary financing. However, we hope for its prompt approval, particularly due to the large debt repayments expected this year and the need to borrow for their settlement and budget deficit financing,” said CEES representatives to Mina-business.
They outlined several key parameters that characterized Montenegro’s economy in the past year: strong household consumption growth for three quarters with an average real rate of 8.3%, steady government spending, a 1.9% growth in gross investments, a 6.4% drop in exports, and a 3.4% rise in imports.
However, the economic growth in 2024 was slower than in 2023, with a real growth rate of 3.1% in the first three quarters. This was primarily due to a 3.6% decline in tourism revenues.
“Assuming stable trends in the fourth quarter of last year, we estimate the real economic growth for 2025 to be about 3.2%. The Montenegrin economy operated under relatively stable conditions, with strong investments in construction and investments from Serbia, Russia, Turkey, and Germany,” CEES representatives added.
Employment grew by 5.4% over ten months, and average salaries increased by 7.7% from January to October.
CEES believes that the growth model heavily relied on high investments in the construction sector, which should be temporary. A stabilization or decline in construction activities would lead to a slowdown in overall economic activity, a reduction in household and state consumption, and a decline in imports.
Looking ahead, the economic trends of 2025 will be influenced by the previous year’s developments, with a projected real GDP growth rate of 3.7% this year. Household consumption is expected to grow by 3%, state consumption by 1%, and investments by 3%. Exports are forecast to rise by 3%, and imports by 1%. Employment growth is expected to slow down due to the stabilization of activities.
Commenting on the proposed budget, CEES noted that it suggests a faster increase in current consumption than in revenue generation. This will push the budget deficit to nearly 280 million EUR, driven by higher current spending and reduced direct tax revenues.
“On the side of current expenditure, the share of transfers for social protection will increase to 13% of GDP, while the capital budget share is planned at only 4.3%, indicating that there will be little contribution from investment spending to GDP growth,” CEES said.
They further explained that the capital budget’s share of total spending and GDP will slightly increase, but the main rise will be in current budget spending. Given the projected increase in the budget deficit and debt repayment obligations, public debt is expected to rise this year and in the medium term.
As for inflation, CEES attributed the volatile price movements to factors such as the pandemic, rising food and energy prices due to worsening geopolitical conditions, as well as domestic factors related to wage and employment growth in the economy. They also cited the anticipated pension increases for January, which will contribute marginally to a 2.6% rise in household consumption.
CEES forecasts that the average annual inflation in 2025 will be around 2.6%, down from 3.4% in the previous year.
Regarding foreign investments, CEES observed a 33% growth in investments in banks and businesses from January to October 2024 compared to the same period in 2023. However, investments in real estate dropped by 5%. Net foreign investments during this period amounted to 412.7 million EUR, an increase of 14% compared to 2023.
CEES anticipates that foreign direct investment trends in 2025 will follow similar patterns as last year.
Regarding their activities for 2024, CEES representatives stated that they will continue their efforts to support sustainable public finance, improve budgetary efficiency, and enhance corporate governance in state and municipal enterprises. They also recently launched a project aimed at improving the criteria for selecting board directors to reduce corruption risks, in partnership with the Center for Civic Education (CGO), with support from the U.S. Embassy and the U.S. Department of State’s Bureau of International Narcotics and Law Enforcement Affairs (INL).
