Montenegro’s fiscal success: Surplus driven by strong revenue growth

In the first five months of the year, Montenegro’s budget achieved a surplus of EUR 33.1 million, equivalent to 0.5% of the estimated Gross Domestic Product (GDP), according to the Ministry of Finance. This represents a significant improvement compared to the planned deficit of EUR 141 million, exceeding expectations by EUR 174.2 million, as detailed in the budget execution report for January-May. In May, the budget recorded a deficit of EUR 21.6 million, which was lower than the planned deficit of EUR 18 million.

From January to May, budget revenues totaled EUR 1.09 billion, equivalent to 15.5% of the estimated GDP, marking an increase of EUR 105.4 million or 10.7% compared to the same period last year.

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Revenue highlights:

• Compared to the plan for January-May, budget revenues exceeded expectations by EUR 77.6 million or 7.7%. Excluding one-time revenues, revenues for this period were EUR 174.5 million or 19.2% higher than the previous year.
• The most significant increases were observed in corporate income tax, which amounted to EUR 185.7 million, personal income tax at EUR 32.1 million, and contributions totaling EUR 217.4 million.
• Excise revenues for the period amounted to EUR 125.6 million, exceeding the plan by EUR 3 million or 2.5%, and were 16% higher compared to the same period last year. The largest contributions to excise growth were from mineral oils and derivatives at EUR 67.7 million, and tobacco and tobacco products at EUR 40.5 million.
• However, there was a slight deviation in VAT revenues, which totaled EUR 435.1 million for January-May, an increase of EUR 46.6 million or 12% compared to last year, but 0.4% lower than planned due to the dynamics of VAT refunds accelerated by the Tax Administration.

Expenditure highlights:

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• Budget expenditures for January-May amounted to EUR 1.06 billion, or 15% of GDP, which was EUR 96.9 million or 8.4% lower than planned, but EUR 183.3 million or 20.7% higher compared to the same period last year.
• The largest increases were in expenditures for pension and disability insurance benefits, mainly due to the increase in minimum pensions, transfers to institutions, and significant increases in public health institutions, as well as wages.
• Current budget expenditures totaled EUR 425 million for the period, EUR 77.4 million or 15.4% below the plan.
• Capital expenditures, including various items under services and other expenses, amounted to EUR 50 million, achieving 90% of the planned capital budget for the period.

In summary, Montenegro’s budget performance for the first five months of the year showed strong revenue generation and careful expenditure management, resulting in a notable budget surplus and surpassing initial fiscal targets.