In a recent commentary for the portal Bankar.me, Montenegro’s Finance Minister Novica Vuković highlighted key measures and expected outcomes of the “Europe Now 2” program. The program, as Vuković explained, is designed to significantly improve the standard of living for citizens and advance Montenegro’s economy through employment growth, increased consumption, and the modernization of the tax system.
The Finance Minister’s commentary, which we present in full below, outlines the government’s priorities and expected impacts of the program:
Economic growth and standard of living
The “Europe Now 2” program aims to drive economic growth by improving the standard of living for citizens and supporting the development of Montenegro’s economy. According to preliminary macroeconomic forecasts, Montenegro’s economy is projected to grow by 3.8% in 2024, with an average annual growth rate of 3.7% in the medium term. A central measure of the program—the increase in the minimum wage and average salary—will have a significant effect on consumption, a key component of GDP and a major driver of economic growth. Alongside this, the reduction in pension insurance contributions will benefit both employees, through higher net wages, and employers, through direct savings. This will form the basis for increased employment and production, ultimately fueling economic growth.
Montenegro is also experiencing its lowest unemployment rate in history, thanks to successful labor market activation measures and private sector support. Programs that promote entrepreneurship and investment, along with the modernization of the tax system, have enabled significant increases in employment, pensions and wages, which are contributing to higher living standards for citizens.
Fiscal reforms and public finance management
A key reform under the “Europe Now 2” program is the enhancement of fiscal transparency and stronger control over public finances. Through the Public Financial Management Reform Program, Montenegro is focused on reducing unproductive spending and increasing revenues through more efficient taxation. The program prioritizes the fight against the gray economy, improving the tax system, and optimizing public expenditure. Additionally, the government continues the reforms begun in “Europe Now 1” by further raising wages and reducing the tax burden on labor, which will make Montenegro a more competitive destination for investment and more attractive for retaining domestic workers.
Tourism, VAT adjustments and fiscal stability
In the tourism and hospitality sector, the government has introduced measures that equalize VAT rates for different categories of services, eliminating market distortions and providing additional revenue to the state while maintaining fiscal stability. The government’s primary focus for the coming period will remain on preserving fiscal stability, further reducing public debt within Maastricht criteria, and improving the business environment. The goal is to increase investment potential and support developmental projects to create a more dynamic and resilient economy.
Efforts are also being made to improve infrastructure, including both digital and transport infrastructure, which will enhance connectivity and improve the competitiveness of domestic businesses. Additionally, by strengthening the regulatory framework for gaming and increasing control in this sector, the government expects to generate additional revenues for the state budget.
Fiscal strategy and long-term stability
The government’s fiscal strategy aims to ensure long-term stability by focusing on sustainable economic growth, increased investment and improvements in citizens’ quality of life. Through fiscal discipline, responsible debt management, and strategic investments in key sectors, Montenegro is committed to maintaining economic growth and stability while advancing its European integration process and global competitiveness.
The current financial situation in Montenegro remains stable, with the ongoing trend of increasing budget revenues and a recorded budget surplus of €85 million (1.2% of GDP) for the first nine months of 2024. This surplus is a result of increased tax collection, strengthened anti-gray economy measures, and changes in tax policy, which will further contribute to the financial sustainability of the country.
Investment in infrastructure and business environment
The government plans to increase disposable income, which will drive personal consumption and increase tax revenue from consumption taxes. Additionally, some of the lost revenue will be compensated by a larger tax base, primarily from increases in minimum wages and other salary categories, as well as from higher income tax revenues due to a lower “tax-free” threshold. The reduction in pension insurance contributions is expected to encourage a shift from informal to formal employment, which will further boost tax revenues.
Creating a favorable business environment
The long-term goal of Montenegro’s economic policy and the expected outcome of the “Europe Now 2” program is to achieve smart, sustainable and inclusive economic growth, improving the quality of life for all citizens. A major aspect of the program will be creating a more favorable business environment, particularly by reducing pension insurance contributions for employers. This will save businesses on labor costs and provide more competitive conditions, encouraging investment, particularly in tourism, energy and infrastructure.
The government also expects an increase in investments over the medium term, supported by a rise in the state’s capital budget and strong financial backing from the EU through the Growth Plan and the Reform Agenda. These investments will focus on private sector development, strengthening human capital, and supporting green and digital transitions.
Impact on young people
The “Europe Now 2” program is expected to have a particularly positive impact on young people by creating opportunities in employment and improving working conditions. One of the key measures includes increasing the minimum wage, which will improve the living standard of citizens and help provide young people with greater financial security. As part of the program, high school graduates will receive a minimum wage of €600, while university graduates will start with at least €800. These measures aim to provide young people with better financial opportunities, encouraging them to stay in Montenegro and contribute to its economic development.
Concluding remarks
The ongoing implementation of the “Europe Now 2” program represents a significant increase in the minimum wage, from €450 to €600 for those with up to V-level education and €800 for those with VI-level education or higher. This reform will have a major impact on projected economic growth in 2025 and beyond. The program is expected to bring significant benefits not only to those earning the minimum wage but also to other workers through the broader implementation of wage increases.
Comparing the current situation with the past, when the minimum wage was €250 and the minimum pension was €110, the “Europe Now 2” program reflects a substantial improvement, with average wages rising to €1,000 and minimum pensions reaching €450. The government has successfully balanced the need to improve living standards with maintaining fiscal stability and economic growth.
Montenegro’s government remains firmly committed to improving the quality of life for its citizens, with statistical data from Monstat showing a 63.3% increase in the average net wage from December 2021 to September 2024, alongside a reduction in inflation to 1.0%. These measures, alongside a decrease in food prices by 1.7%, show the government’s determination to improve purchasing power and support domestic producers. With further reductions in inflation expected, these policies will continue to bolster Montenegro’s economic growth and stability.
