Prime Minister Milojko Spajić stated that wage increases in Montenegro, resulting from the “Europe Now” program, did not contribute to inflation, calling claims to the contrary a misleading narrative.
During a panel discussion titled “Analysis of Prices and Operations of Retail Chains in Montenegro,” held today at the University of Montenegro’s Faculty of Economics, Spajić emphasized that inflation was not influenced by profit margins or increased demand.
“An analysis showed that import inflation between 2021 and 2023 cumulatively amounted to 29%, and food inflation was 31%, which leads to the logical conclusion that input costs were the primary cause of inflation,” said Spajić.
He pointed out that profit margins were capped as of September last year, while the “Europe Now 2” program was being implemented.
“The average inflation in November, December, and January in Montenegro was lower than in the Eurozone. This clearly demonstrates that net wages do not affect company costs, contrary to the spin that was constantly used,” Spajić explained.
Spajić also remarked that in small economies like Montenegro, wage growth cannot directly impact inflation. Furthermore, he mentioned that demand in Montenegro has not increased since 2022, meaning wage growth did not stimulate higher product consumption nor contribute to inflation.
He further argued that before 2022, the labor market in Montenegro was characterized by a “wild economy,” with most employees receiving part of their wages “under the table.”
Before the “Europe Now” program, there were 210,000 employees in Montenegro, while today that number has risen to 287,000, according to Spajić. “Do you believe that almost 80,000 jobs were created in just two and a half years? Of course not. These are 80,000 jobs that were legalized,” he explained.
Spajić also noted that while the share of labor in the gross domestic product (GDP) increased, productivity has fallen, though he clarified that this decline was not realistic.
As for retail chains, Spajić mentioned that their profit margins had dropped in 2022, but recovered in 2023, which is evident from the net profit that tripled in two to three years. He stressed that it was crucial for the government to ensure the economy remains robust.
He argued that the error in the analysis being discussed was the assumption that wage growth contributed to inflation. “You used data from Monstat, which in 2021 and previous years had inaccurate data because the shadow economy was too large,” Spajić said.
Professor Maja Baćović from the Faculty of Economics presented the analysis titled Macroeconomic Environment in Montenegro for the Period 2021–2023, focusing on the food and beverage sector. She explained that the study’s goal was to examine whether retail chains’ costs influenced the rise in food prices.
“Increases in procurement costs, material expenses in the retail sector, and growing gross wage costs were the main factors driving price increases. The profits of retail chains remained stable,” said Baćović.
She noted that price hikes occur when wages grow faster than labor productivity. She also pointed out that imposing margins on certain food products negatively affected specific retail businesses.
According to Baćović, the rise in food prices was not caused by margin changes but by the inputs used in the retail sector. The study did not focus on the reasons behind wage growth.
Branko Krvavac, Chief of Staff for the Prime Minister, commented that the foundations of the analysis were flawed. “You said that when wages grow faster than productivity, price growth is inevitable. While a company’s profit significantly changes, there were no losses in these businesses. In the retail sector, 15,000 new jobs were created,” Krvavac explained.
He added that with capped margins, Montenegro is experiencing monthly deflation. “We capped margins, implemented the ‘Europe Now’ program, and we are below the EU zone inflation. Take France, Bulgaria, and other EU countries – we are under their inflation rates. They didn’t have ‘Europe Now,’ nor did they see wage growth or reduced tax burdens on labor, yet their inflation rates are higher than ours,” Krvavac stated.
He concluded that the “Europe Now” program had no negative impact on companies or their income and, in fact, increased their profitability.
Dean of the Faculty of Economics, Mijat Jocović, questioned what kind of professors they would be if they chose not to conduct such studies. “What kind of professors would we be if we said we have no opinion and are afraid to express it? What kind of society are we creating if professors claim they are incompetent and don’t have a stance?” he asked.
Jocović also said that the study and the limitation of margins open a fundamental question: the nature of economic institutions in Montenegro. He emphasized the need to address monopolies, asserting that they determine market functioning, not the professors of the Faculty of Economics.
“The essence is monopolies, and we must answer whether there are any in Montenegro in any market, not just in the food retail sector, and whether anyone is abusing the market,” Jocović concluded.
