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Thursday, May 23, 2024
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World Bank report: Montenegro’s economic forecast and resilience

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The World Bank (WB) forecasts a 3.4% growth for the Montenegrin economy this year, underlining the necessity of robust growth to hasten convergence with the European Union.

Milan Lakićević, the WB economist for Montenegro, hailed Montenegro’s economic resilience as the strongest in the region.

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“After weathering the pandemic-induced historic recession, we’ve witnessed a remarkable economic recovery, averaging an 8.5% growth from 2021 to the previous year,” Lakićević remarked during the presentation of the regular economic report for the Western Balkans.

He noted that Montenegro recorded the highest economic growth rate in the region last year at six percent, attributed to increased private consumption, a resurgence in tourism, and heightened foreign investment.

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“The robust economic activity has positively impacted the labor market, with employment reaching an all-time high. The labor force participation rate of 64% among citizens aged 15 and older is the highest in the Western Balkans,” Lakićević specified.

He highlighted that this momentum has carried into the first quarter of this year, with significant employment growth observed across all sectors.

“Inflation has markedly slowed due to a high base in 2022, now reduced to 4.3% annually. However, notable monthly inflation persists, driven not by food and energy prices, but by other factors,” Lakićević explained.

While wages increased by 2.3% last year, largely propelled by public sector wage hikes, the disparity between net wages and the real minimum consumer basket narrowed towards the end of the year.

Despite a decrease in foreign direct investments, strong service exports contributed to a reduction in the current account deficit. However, non-performing loans remain a concern, albeit declining to 5.9% – the highest level among Western Balkan countries.

Lakićević highlighted the fiscal surplus achieved last year, surpassing both planned and anticipated levels.

“We witnessed a 26.7% growth in revenues, particularly in value-added tax (VAT) and non-tax revenues, driven by significant one-off revenues and EU donations,” Lakićević noted.

He pointed out that while domestic risks persist, including political uncertainties and fiscal pressures, external risks such as geopolitical tensions and rising financing costs could impede global growth.

Denis Mesihović, WB operations officer, projected a 3.2% economic growth for Western Balkan countries this year, with a further increase to 3.5% next year.

“This cautious optimism reflects the region’s resilience to recent shocks, with optimism bolstered by the EU’s Growth Plan for the Western Balkans,” Mesihović stated.

He emphasized the potential economic benefits of regional improvements such as streamlined border procedures and modernized payment systems.

Mustafa Čopelj, WB consultant, emphasized the pivotal role of cities in driving growth and combatting climate change in the Western Balkans.

“Capital cities, constituting a significant portion of GDP, serve as hubs for residence and employment,” Čopelj concluded.

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