The credit rating agency Standard and Poor’s (S&P) has upgraded Montenegro’s outlook from “stable” to “positive” while maintaining the credit rating at ‘B/B’, according to the Ministry of Finance. S&P released a new report for Montenegro, characterizing the country’s previous outlook as “stable” and improving it to “positive,” with the credit rating remaining ‘B/B.’
According to the methodology of Standard & Poor’s credit rating agency, taking into account positive economic trends and fiscal results characterized as favorable in the report, the revised outlook for Montenegro’s credit rating signifies positive developments in the country’s economy and optimistic expectations for the future, as stated in the press release.
Standard & Poor’s assesses outlooks based on potential credit ratings in the medium and long term. When determining the rating forecast, changes in economic, political, fiscal, and other conditions are considered. In this context, a shift in the outlook to “positive” indicates the possibility of a credit rating increase for the country in the medium and long term.
The S&P report suggests that the improvement in Montenegro’s credit rating could occur in the next 12 months if fiscal results surpass current predictions, accompanied by a downward trend in the net public debt. This improvement might result from stronger economic growth or fiscal consolidation measures. Additionally, an enhancement in the rating could happen with a more robust external position for Montenegro compared to current forecasts, according to the Ministry. The positive outlook primarily reflects the potential for Montenegro’s fiscal and payment balance to prove stronger than currently anticipated during the next year, further reducing the level of net public debt as a share of the economy after consistent declines from 2021 to 2023.
The Ministry’s statement emphasizes that the positive outlook primarily indicates the potential for continued strengthening of Montenegro’s fiscal performance in 2024-2025. Despite the current prediction of an average budget deficit of 3% of GDP in the next two years, Montenegro achieved a balanced budget in 2023, mainly supported by strong revenue performance and one-time factors such as income from economic citizenship and EU donations.
Analysts believe that further growth in tourism and domestic consumption, improved tax administration, and additional revenue collection measures could support a stronger budgetary performance for Montenegro. The forecast anticipates an average fiscal deficit of 3% of GDP from 2024 to 2027, following a 0.5% surplus in 2023 achieved with the help of one-time revenues. The credit agency estimates that the current account deficit will average 12% of GDP in the medium term.
For 2024, inflation is expected to stabilize at an average rate of 4.3%, supported by base effects and further decreases in food prices. The report notes that the banking sector in Montenegro currently demonstrates strong liquidity.
Expectations are that the Montenegrin economy will continue to attract foreign direct investments (FDI) of around 10% of GDP annually in the medium term, concludes the Ministry of Finance’s statement.
