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NewsEconomic challenges in Montenegro: Insights from analyst

Economic challenges in Montenegro: Insights from analyst

Montenegro has experienced a loss of three billion euros in GDP related to trade, highlighting a heavy reliance on imports, which undermines the economy, according to economic analyst Mirza Mulešković in an interview on the Budilnik morning program on Televizija E.

Mulešković emphasized the need for economic diversification and the development of a robust real economy. “These figures indicate a structural problem within the economy, with several sectors not sufficiently developed. The data from 2023 shows that the first two quarters of 2024 are even weaker,” he noted.

He urged decision-makers to shift focus from administratively increasing salaries to fostering real economic development, asserting that a thriving real economy is essential for generating wealth. “Reducing imports will elevate our living standards. When we invest in domestic production, more wealth stays within the country, enabling the expansion of such economic activities. Otherwise, money injected into consumer spending simply drains out to foreign markets,” Mulešković explained.

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For recovery, he suggested that initiating production and creating new jobs is feasible, though the current emphasis has been on public sector employment, which has seen over 25,000 new jobs created in the past two years. “Increasing salaries without generating new economic value cannot sustain long-term economic policy,” he emphasized.

Mulešković also pointed out that political instability has led to a decline in foreign direct investment, as investors prioritize a favorable investment environment and predictable costs. “You can’t expect that a change in one piece of legislation will attract new investors. If the minimum wage increases above regional averages, it won’t entice foreign investors either. They need stability to plan their business strategies,” he said.

He highlighted that Montenegro’s GDP per capita lags behind the EU average, contradicting claims by the current government regarding improved living standards. “GDP per capita can only grow if economic activity increases. We’ve only seen a rise in consumption, which has inflated prices without enhancing living standards,” Mulešković asserted. He criticized the lack of strategic economic management, noting that decisions have been made reactively rather than through comprehensive planning for the future.

Mulešković believes Montenegro has the capacity to invest in domestic production and workforce development, provided policymakers prioritize these areas. “The state shouldn’t be the largest or most desirable employer. In a small country where over 30% of jobs are in public administration, a strong economy cannot flourish,” he said. He emphasized the need for practical experience, exposure to successful European models, and the adoption of new technologies, all of which require investment.

He identified agriculture as a critical sector for economic recovery, indicating that it has stagnated in 2023 and 2024 despite potential growth opportunities in international markets. Other sectors that could strengthen the economy include manufacturing, the IT industry, energy and tourism, particularly by linking agriculture to tourism.

Mulešković concluded that without collaboration between central and local authorities, conditions for economic growth cannot be established. “We cannot expect growth when policies are inconsistent or localized to specific political areas. Political instability has exacerbated our economic issues, and unless we address these problems soon, we risk deeper crises,” he cautioned. However, he expressed hope that recent discussions on the economy among political leaders signal a shift towards prioritizing economic stability and growth.

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