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Montenegro was the least developed republic in Yugoslavia. Today it has a market economy, the official currency is the euro, citizens earn an average of 519 euros per month and retirees about 300 euros.
According to data from the end of last year, Montenegro’s GDP is worth $ 5.4 billion or $ 8,700 per capita.
Economic growth in recent years has been boosted by work on major infrastructure projects, particularly road construction, local infrastructure, and good tourist seasons. Last year, growth slowed due to high public debt, the IMF explained.
The European Commission openly said that Montenegro’s debt and road construction costs started to take their toll in 2015, causing a drastic increase in the state deficit and debt.
At the end of 2006, when Montenegro voted for independence, the public debt amounted to € 701 million, and thirteen years later, Montenegro owed € 3.3 billion, while GDP amounted to 70.8 percent of GDP. Public debt has increased almost five times and GDP two and a half times. In translation, public debt grew twice as fast as BD.
Thus, last year, Montenegro had the lowest economic growth of the six Western Balkan countries, as shown by separate projections from the IMF, the World Bank and the European Commission.
Services represent more than 60 percent of GDP
Montenegro’s economy is highly dependent on tourism and energy. The economy is based on small and medium-sized companies, which generate more than half of GDP. The service sector represents more than 60 percent of GDP. The agricultural sector represents 7.4 percent of the total economy and employs mainly local labor.
In the last 13 years, Montenegro has been without property in the Aluminum Plant, the Bauxite Mine, the Ironworks …
Montenegro has a developed south and a less developed north. Unemployment is around 16% and is especially pronounced in the less developed municipalities of the northern region. A large number of non-residents of the countries of the region and individual members of the EU carry out permanent and seasonal jobs, mainly in tourism and construction.
The state of the economy in 2006 and 2019
Since 2006, pensions and wages have been growing, as well as VAT, the prices of food, electricity and other goods that affect the standard of living.
Monstat does not have foreign trade data for 2006, while according to 2010 data, the change amounted to 1.984 million, while the deficit in trade amounted to 1.324 million. Exports were 330 million. In 2018, the change amounted to 2.9 billion, while the deficit was two billion.
The newspaper “Dan” also calculated that the number of civil servants increased from 1,700 to five thousand five hundred in 13 years.
Investments
According to 2019 data, the number of foreign-owned companies increased by 48 percent compared to 2018. Last year, there were 29 percent of them from Turkey, just under 17 percent from Russia, 5.7 from Ukraine, 5.3 from Italy …
Most of the foreign investments are in Podgorica and Budva.
The way Montenegro attracted investment is interesting: the opening of a company with a starting capital of one euro, simple procedures, a nine percent tax on people’s earnings and income, the fact that domestic investors and foreigners receive almost equal treatment.
However, foreign investors in Montenegro are hardly interested in the industry. Up to a quarter of companies with foreign owners are engaged in commerce, a fifth in professional, scientific and technical activities, and only in third place are companies in the construction field.
Investors note that the existence of the euro as a currency is also a great motivation: “It is a great advantage to work and profit from your business in a strong currency”, as one Turkish businessman put it.
In 2011, Montenegro became a member of the World Trade Organization. Free trade agreements, which Montenegro has signed with the European Union, EFTA, CEFTA, the Russian Federation, Turkey and Ukraine, allow Montenegrin companies to access the market of more than 800 million people.
The huge impact of the coronavirus pandemic
Montenegro is in the group of countries whose economy depends heavily on tourism, the branch most affected by the coronavirus pandemic. So it is clear how much damage this will do to this country.
The Montenegrin government said in June that the country would have to borrow about 500 million euros, instead of the expected 100. The government expects GDP to fall 6.8 percent and public debt to reach 379 billion euros or 82.5 percent of GDP. -a.
And that’s optimistic, because the new updated IMF estimates say Montenegro will see a nine percent GDP drop this year.
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