According to the expectations of the European Bank for Reconstruction and Development (EBRD), Montenegro will continue to grow this year, with significant potential for increasing energy production from renewable sources, improving infrastructure and developing the ICT sector.
The Head of the EBRD Office In Montenegro, Remon Zakaria, said that there is significant potential for increasing the production of renewable energy, especially if there is the right regulatory environment to encourage private investment.
This would not only support economic activity, but also support Montenegro on its path to decarbonization and environmental sustainability – said Zakaria in an interview with the Mina-business agency.
Additionally, with an increased focus on improving transport links, Montenegro could diversify its economy away from seasonal “sun, sand and sea” tourism, enabling more economic activity throughout the year in this sector, which is already an important source of gross domestic product (GDP). .
Finally, the ICT sector, which currently represents four to five percent of GDP, has great potential to contribute to further economic development and diversification of the economy – Zakaria assessed.
In the latest forecasts, the EBRD foresees a growth of the Montenegrin economy of 3.3% this year.
We expect that all the economies of the Western Balkans, including Montenegro, will continue to grow this year. However, growth is likely to be weaker compared to last year because the macroeconomic environment at the domestic and global level remains unfavorable. The outlook is marked by particularly high uncertainty with significant risks – said Zakaria.
He stated that the consumption impulse is expected to decrease as high prices further erode disposable incomes, while the expected slowdown in global growth will spill over to Montenegro through tourism, trade and investment ties.
Last year’s strong performance of the catering sector and the increasing diversification of Montenegrin tourists gives us confidence in the upcoming summer tourist season, which still has room for recovery because the number of foreign visitors last year remained below the record level from 2019 – Zakaria stated.
Assessing the economic situation this year, he said that the continuously high inflation, although it is expected to have peaked, should remain high this year, reducing gains in real wages. At the same time, the tightening of monetary policy around the world in an effort to curb inflation contributed to the deterioration of global financial conditions. Higher borrowing costs also make managing public finances a difficult task, with medium-term vision and careful planning key to maintaining sustainability, Zakaria said.
On the other hand, as he stated, Montenegro is one of the few countries in the Western Balkans that has so far avoided the energy crisis, an important risk factor for almost all other economies in the region. Finally, there is a significant risk that would support investor confidence – solving the political deadlock in a way that would reduce volatility on the domestic political scene, increase consistency in the creation of economic policy and speed up the implementation of the reform agenda – added Zakaria.
He said that the EBRD’s priority Is to promote investments in renewable energy sources and support reform policies that help unlock the great available potential, applying the best market practices from their vast experience in several countries where they operate.
We recently launched a comprehensive policy support program with the Government, which aims to reform the sector and introduce auctions for renewable energy. The first step of our technical assistance includes support in drafting the new law on renewable energy, which we hope will be adopted soon – said Zakaria.
With the right set of reforms, Montenegro, he believes, can create an encouraging environment for private sector investments in renewable energy sources, making affordable clean energy available to its citizens.
The EBRD invests directly in renewable energy sources, where we participated in the financing of the first commercial wind farm in Krnovo. Our board recently approved the financing of a 54.6 megawatt (MW) wind farm, which we hope to sign with Elektroprivreda (EPCG) soon – said Zakaria.
The EBRD adopted a new five-year national strategy for Montenegro in September 2021, in which the priorities are strengthening the competitiveness of the private sector, supporting the country’s transition to a green economy, and supporting further connectivity and integration.
When asked how relevant that strategy is today given the turbulent global macroeconomic situation, Zakaria replied that the EBRD’s strategy for the country remains very relevant in the current macroeconomic context.
This turbulent time has shown that energy security is a vital element of resilience and that it has become more important due to new security challenges. Our strategic focus on the transition of the green economy – promoting renewable energy sources and energy efficiency – is therefore crucial for helping Montenegro’s energy security while preserving its beautiful environment and contributing to its decarbonization path – Zakaria assessed.
Resilience and economic diversification are largely linked to, as he said, their second priority in the country’s strategy – improving cross-border transport connectivity, energy links and access to IT and broadband throughout the country.
Supporting connectivity between countries helps increase and diversify trade and creates economic opportunities for different sectors. This is even more true today as global supply chains face challenges. IT and broadband connectivity are also of key importance to enable the development and flourishing of the digital economy ecosystem – said Zakaria.
Strengthening the competitiveness of the private sector, the third priority of their strategy, is self-explanatory and very relevant in the context of Montenegro – it relies heavily on tourism and has a strong need to improve its competitiveness in the region through skills improvement, gender and economic inclusion and digitalization .
Last year, the bank invested EUR 23 million in six projects. Zakaria said that 75% of their investments related to green financing, which is a record year for Montenegro, and four out of six projects included a gender and economic inclusion component.
Significant achievements are the signing of a loan of 11 million EUR with a railway infrastructure company for the purchase of maintenance equipment to improve the safety and reliability of the railway, the signing of our first credit line for young people in business of 3 million EUR with the microfinance institution Alter Modus, the signing of our first support program competitiveness of SMEs (SME CSP) of three million with the Montenegrin Commercial Bank (CKB), initiation of comprehensive technical assistance support (grant of EUR 1.45 million, for the reform of the energy sector and the introduction of auctions for renewable energy, support for the establishment of a single access point for SMEs and support for 41 SMEs in improving competitiveness and business practices through 15 workshops/trainings and visibility events – specified Zakaria.
He concluded that their priorities in the coming period are the delivery of investments in the energy sector and the continuation of activities related to policies, as well as working with small and medium-sized enterprises on policies and investments, through their credit lines.