Electricity production is on the rise, yet the nation’s reliance on Pljevlja, hydrological factors, and imported goods keeps its trade balance precarious.
In the latter half of 2026, Montenegro’s export performance may increasingly hinge on electricity rather than traditional manufacturing sectors. The country’s trade position remains structurally vulnerable, as evidenced by data from the first quarter of 2026, which indicated total external trade in goods at €1.07 billion, reflecting a 2.2 percent decline compared to the previous year. Notably, exports dropped by 15.2 percent to €127.3 million, while imports remained relatively stable at €944.5 million. Consequently, the export-import coverage ratio fell to 13.5 percent, down from 15.9 percent a year prior.
Electricity plays a pivotal role in this export landscape. During the same period, mineral fuels and related products emerged as Montenegro’s top export category, valued at €48.4 million, with electric current alone accounting for €44.4 million. This underscores the sensitivity of the country’s goods-export performance to fluctuations in power generation and pricing.
Recent production figures indicate a recovery trend in industrial output. In the first quarter, industrial production increased by 7.5 percent year-on-year, largely propelled by a substantial 27.3 percent surge in electricity, gas, steam, and air-conditioning supply. However, manufacturing experienced a decline of 4.0 percent, and mining and quarrying saw a significant drop of 17.0 percent.
This situation presents a divided outlook for industrial growth. In the second half of 2026, it is anticipated that Montenegro’s electricity sector will support economic expansion more robustly than manufacturing, especially following the temporary closure of the Pljevlja thermal power plant in 2025 for ecological upgrades. The European Bank for Reconstruction and Development (EBRD) reported that growth slowed in 2025 partly due to diminished electricity exports during this period but noted improvements post-resumption of operations at the plant.
The recovery process is not without risks. Montenegro’s power infrastructure is heavily centralized around Pljevlja, which is crucial for energy generation. Additionally, hydropower output remains contingent on climatic and water availability conditions. According to OECD analysis, hydropower contributed over half of Montenegro’s electricity generation in 2023, with coal-fired generation reliant on the Pljevlja facility.
On a more positive note regarding investment prospects, January saw Montenegro’s state-owned utility EPCG enter into discussions with UAE-based Masdar to explore a joint venture focused on large-scale renewable energy projects encompassing solar, wind, hydropower, battery storage, and hybrid systems. These initiatives are aimed at fulfilling domestic energy needs while also positioning for potential green energy exports via an undersea cable to Italy.
The forecast for the latter half of 2026 suggests a trajectory of recovery rather than transformation. While electricity exports are expected to improve from the disrupted base established in 2025, Montenegro’s overall trade situation will likely remain unfavorable due to high import levels and limited manufacturing exports.
The firms best positioned within this landscape include those linked to EPCG, contractors engaged in renewable development, grid and battery-storage suppliers, engineering companies, and entities focused on reducing their energy consumption. Conversely, firms reliant on imports with minimal pricing power and manufacturers facing elevated energy or logistics costs are expected to struggle.
Although electricity output is projected to contribute positively in H2 2026, Montenegro’s trade deficit is expected to persist at significant levels. While renewables present long-term strategic opportunities, they have yet to sufficiently alter the trade dynamics anticipated for 2026.
The narrative surrounding Montenegro’s energy sector has evolved beyond mere utility concerns; it now represents one of the few avenues capable of significantly impacting the nation’s export calculations.
