Montenegro should move away from growth driven by consumption and borrowing as its budget deficit stands at 4.3% of GDP and public debt at 64% of GDP, the nongovernmental association Strategy for a European and Civic Montenegro (STEGA) said in a statement. It called on the Government of Montenegro to prioritise fiscal discipline, efficiency and productivity, and to reduce both the deficit and debt gradually.
Those figures exceed both Maastricht reference values cited by STEGA: a deficit of up to 3% of GDP and public debt of up to 60% of GDP. The group warned that borrowing above the debt threshold could carry considerably higher interest rates and require more substantial collateral. It regards the reference values as limits on spending and borrowing, rather than capacity to be used up.
Economic growth slowed from 6.5% in 2023 to 2.7% in 2025, according to STEGA. Since 2019, real wages have risen 46% while real GDP has grown 17%, it said. The group argued that neither use of the euro nor progress towards European Union membership can, by itself, ensure stability or growth in the absence of a productive economy and responsible management of public finances.
Wages and debt repayments
An announced wage increase from 1 January 2027 poses a risk if productivity does not rise alongside it and businesses lack systematic support, in STEGA’s assessment. It said wages rising without matching productivity gains would increase operating costs and particularly weaken the competitiveness of micro, small and medium-sized enterprises.
Large repayments on existing debt fall due in 2027 and 2028. STEGA warned that the wage policy, combined with those obligations, could deepen a public-finance crisis, lead to higher tax rates and add inflationary pressure, ultimately reducing citizens’ living standards. Borrowing should not be treated as a long-term way to sustain public finances, it argued.
To strengthen the state’s protection against a crisis, the group proposed building significant reserves while bringing down the deficit and public debt over time. It also wants permanent increases in budget obligations to be funded by permanent revenue. That approach would limit the use of new debt to support continuing expenditure.
Public investments should be judged by their economic and social outcomes, rather than their cost or the government’s description of them, according to the proposal. STEGA linked that test to its call for more disciplined spending: an expensive project does not become a development project simply because it is labelled one.
Productivity and competition
STEGA set out three drivers for a different growth model: better education, greater competitiveness and productivity, and more efficient movement of resources to productive uses. The education challenge is reflected in PISA 2022 results: six in ten 15-year-olds in Montenegro did not reach the basic level in mathematics, twice the share in the European Union. The group wants schools to equip people to solve problems, use modern technology and improve production and services; it argued that more diplomas alone cannot substitute for knowledge.
In services, margins are around 1.5 times higher than in manufacturing, STEGA said. It proposed removing obstacles to new companies entering markets and applying equal rules to domestic and foreign participants. In its view, access to the European Union’s single market will deliver its full benefit only if Montenegro also opens its own market to genuine competition.
More than half of foreign direct investment in Montenegro goes into real estate, according to the group. It called for capital and labour to move more effectively towards productive companies and activities. More effective bankruptcy proceedings, faster courts and conditions that allow successful businesses to expand form part of that proposal.
Political protection for unproductive businesses imposes costs on the rest of the economy, STEGA warned. Its proposed alternative to consumption, borrowing and debt-funded populism is a model based on work, knowledge and productivity, supported by changes to how resources are allocated.
STEGA urged the government to carry out the necessary reforms before formal entry into the European Union, while the conditions attached to accession still apply. The EU can provide a market, funds and an institutional framework, it said, but domestic authorities must carry out the reforms themselves.
