According to the projection of the Center for Economic and European Studies (CEES), the real growth of the gross domestic product (GDP) of Montenegro will be around two percent this year, which is lower than the Government’s official projection.
In the document of CEES entitled Review of economic indicators for last year and this year’s projections, it is stated that, based on the analysis of trends in the key components of consumption, it is estimated that the real growth of the economy last year was between 5.8 and 6.3%, while this year, he expects it to be around two percent.
– Given that this year, due to inflation, personal consumption will no longer have such a strong contribution to GDP growth as it did last year, and that a further decline in investments is expected, CEES’s projection is that real GDP growth this year will to be around two percent, which is lower than the Government’s official projection – the announcement states.
As they said, the lower rate of economic growth would affect the achievement of lower budget revenues this year compared to the plan.
– Bearing in mind the huge increase in expenditures planned in the budget for last year, especially for social protection, the risks of financing the budget will be significantly increased, if the state does not borrow on the international market soon – CEES said.
Borrowing will certainly, bearing in mind the existing fiscal indicators of Montenegro, be very challenging, especially because at the end of December last year, the offer of Montenegrin bonds on the Frankfurt Stock Exchange was at a discount of about 20 percent, and the interest rate was about eight percent.
– Also, the announcement by the European Central Bank that, due to still high inflation, it will increase interest rates in the next period as well, indicates that the first half of this year will be characterized by even more expensive borrowing – the statement added.
The CEES announced that all of the above indicates that the Government must, as soon as possible, implement budget savings measures, that is, fiscal consolidation, which would lead to the improvement of Montenegro’s projected fiscal indicators, which the CEES has repeatedly warned against.
– This would reduce the huge public finance deficit, which is officially projected at around six percent of GDP, but which can be higher, bearing in mind that the official GDP projection for this year is optimistic. Urgent measures of fiscal consolidation would avoid a possible delay in the payment of salaries, pensions, social benefits, due annuities on loans and other categories of mandatory spending this year, which cannot be financed without debt – CEES explained.
As they said, the growth of personal consumption through the administrative increase in wages, the highest inflation since the restoration of independence of Montenegro, which reduced the purchasing power of citizens, the decline of investments and the growth of current budget spending marked the last year.
Inflation of 17.5% in November last year reduced the purchasing power of citizens, which is reflected in a significant decrease in real earnings compared to January of last year.
– Thus, citizens were able to buy significantly less goods and services for an average net income of EUR 721 in November last year than with an average net income of EUR 686 in January last year – CEES claims.
As they stated, personal consumption, especially in the first half of last year, contributed the most to the increase in GDP, while investments stagnated and began to fall from the third quarter, local media reports.