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Wednesday, April 24, 2024
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Montenegro’s economic review: Examining FDI patterns, trade Shifts, and growth potential

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In the previous year, Montenegro witnessed a notable decline in Foreign Direct Investment (FDI) Net Inflow, which stood at 428.7 million EUR, marking a substantial drop of 45.2%, as indicated by data sourced from the Ministry of Finance‘s monthly macroeconomic report. This report also sheds light on a significant structural shift in ownership investment compared to the preceding year.

In 2022, investments in companies and banks constituted 19.1% of the total FDI inflow, a figure that dwindled to 11.1% in 2023. Conversely, investments in real estate surged from 38.9% in 2022 to 54% in 2023, as outlined in the document.

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Key contributors to FDI included Serbia with 78.3 million EUR, the Russian Federation with 56 million EUR, and Germany with 51.2 million EUR investments, collectively amounting to approximately 40% of the total investments directed towards real estate in Montenegro in 2023.

Additionally, the report highlights a surplus budget of 16.3 million EUR recorded in January, alongside a significant decrease in exports by 49.9%, a decrease in unemployment rates, and a reduction in tourist numbers.

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Exports experienced a notable decline due to reduced demand from the EU, primarily impacting the export of electric energy, aluminum alloys, and bauxite mineral ores. On the other hand, imports saw a marginal increase, primarily driven by the surge in imports of chemical products and machinery.

Montenegro’s GDP witnessed a commendable growth rate of 6% in 2023, the highest among Western Balkan countries. This growth was driven by positive performances across key domestic GDP categories, including exports, private consumption, and gross fixed capital formation.

In January, industrial production surged by 9.4%, with manufacturing and mining sectors leading the growth. However, the tourism sector experienced a setback, with a decline in tourist nights, attributed to a weaker winter season and decreased visits from key source markets like Russia and Ukraine.

Despite economic challenges, retail trade demonstrated robust growth, with turnover surging by 13.3% in January 2024. The financial sector also continued its upward trajectory, with Montenegrin banks reporting a substantial increase in net profit compared to the previous year.

Looking ahead, Montenegro’s economic prospects remain subject to fluctuations in the international economic landscape, with the European Commission revising growth expectations downwards for the EU and Eurozone. However, gradual improvements in economic activity are anticipated, buoyed by factors such as declining inflation, rising real wages, and labor market resilience, which are expected to stimulate consumer spending.

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