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NewsMontenegrin economy growth lower than last year, but still positive

Montenegrin economy growth lower than last year, but still positive

The Montenegrin economy will grow at a rate of around two percent this year, i.e. much slower compared to the previous one, the Center for Economic and European Studies (CEES) announced, stressing the risk of transferring budgetary challenges to the banking sector.

– This year, the Montenegrin economy will grow at a rate of around two percent, i.e. much slower compared to the real growth rate of 6.1% last year, which is in line with the CEES’s earlier assessment of economic growth last year – he says in the latest Review of Economic Indicators by CEES.

They stated that the reasons for the slower economic growth this year are the expected stagnation or decline of the most important components of the gross domestic product (GDP), namely household consumption, which began to decrease from the second half of the previous year due to the decrease in real income, as well as the investments that started to fall, with further decline expected this year.

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According to CEES estimates, tourism revenues are expected to be roughly at the same level as last year, given slower global growth and high revenues in the previous year.

The CEES announced that the continuation of the increase in interest rates on the international market, in order to reduce the inflation rate, will affect the increase in the price of loans for citizens and the economy in Montenegro, which will be reflected in the reduction of economic activity.

– The recent announcement by the state that it will issue domestic bonds to finance the budget will affect the reduction of funds in banks that can be allocated for lending to the economy and citizens. That is why it is certain that the banking sector, in the existing environment, will not be able to significantly support the growth of investments this year – they believe in CEES.

Also, bearing in mind the “quakes” in the banking sector in the United States of America (USA) and Europe, it is very important that the issuance of bonds on the domestic market does not threaten the liquidity of the Montenegrin banking sector.
– The banking sector is liquid and stable, but it is important for the Government to contribute to its strengthening, in such a way as to consolidate public finances and increase their credibility. This is important because this is the only way the Government can provide more favorable access to the international market, in order to collect the necessary missing funds for the payment of budget obligations, especially due to the significant increase in gross salary expenditures this year – they said from CEES.

Bearing in mind the growth of interest rates as well as the high inflation base in the previous year, CEES expects that the inflation rate in Montenegro will fall in the following months of this year.

– If there are no further external and internal shocks, the average inflation rate this year could be around ten percent. Certainly, the high rate of inflation at the beginning of this year influenced the reduction of real wages in January by 5.1 percent, which reduced the purchasing power of citizens – the CEES concluded.

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