A few days ago, the IMF published revised forecasts for the growth of the global economy for 2020. The data are not encouraging: the decline of the global economy will amount to 3%. When it comes to Montenegro, the decline of the Montenegrin economy will amount to a whopping 9%, three times more than the global decline.

Of course, official statements do not acknowledge the overall difficult socio-economic situation in the country, which has significantly worsened in recent years. According to the established scheme of uncritical assessment of the position of the ordinary citizen, the public is systematically and systematically bombarded with carefully prepared half-information about GDP growth, the fastest growing economy and similar statistical half-truths. In fact, the systematic reliance on mere, dry and raw numbers devoid of any meaningful life and economic context, put citizens and the economy in the background and enabled the appearance of endless repetition of the same data from different official and unofficial addresses.

The wider picture of the Montenegrin economy

If we take into account the broader picture of the Montenegrin economy and put into context the crisis caused by the corona virus, things are like this: • The Montenegrin economy is weakly competitive, which is primarily caused by modest exports and the systematic collapse of production and processing capacities. Montenegro is recognized as a raw material base from which raw materials are imported and which after secondary and/or final processing (products with higher margins) are returned to our market at many times higher prices. • In the light of the new economic crisis, the information that at the end of 2019 is of particular concern In 78, the public debt of Montenegro amounted to 2007% of GDP, which is a multiple increase compared to XNUMX. year. Because of the above, Montenegro has too weak a mechanism for mitigating the impact of the crisis on the domestic economy, which is extremely sensitive to external shocks that are happening right now. • Despite the increase in public debt, the unemployment rate is significantly high - at the end of 2019. is 16%. The fact that at the end of 2007 sounds paradoxical and particularly worrying. the unemployment rate was lower than today; it was 12%. • The priority section of the highway is the biggest problem of public finances; it can be written that the whole of Montenegro is hostage to this project. The arrangement for the priority section of the highway, the first installment of which is due soon, had numerous structural flaws: it was contracted in dollars, it is economically unprofitable, insufficiently transparent, the agreed amounts and deadlines were exceeded, it is outside the public procurement system, while its impact on the environment is best represented by the report of the UNESCO mission, which states that the Tara River is permanently devastated in some places. • Tourism generates an amount equivalent to a quarter of Montenegrin GDP; annual revenues from this branch of the economy amount to 1,1 billion euros. This year, those revenues will fall by 90% or by as much as one billion euros, which puts the entire economic system under extreme strain that can hardly be controlled without new massive external borrowing. • At the end of March, the amount of blocked funds amounted to an extremely high 635 million euros, which is as much as 13% of GDP. Over 18.000 companies have blocked accounts, which is over 60% of the total number of registered companies in the country. With the new crisis, a large number of these companies will rapidly go bankrupt, while the tsunami of insolvency will intensively spill over to other entities in the Montenegrin economic system. • The country's balance of payments, which has been "ironed" for years through inflows from tourism, foreign direct investments, exports and remittances of natural persons from abroad, will be seriously threatened. Inflows have decreased significantly, while outflows are rapidly accelerating. According to the available information, the inflows of these categories in 2019 amounted to over 2,2 billion euros, while this year this amount will be many times lower. • The gray economy continues to represent a huge problem for public finances because it accounts for between 30 and 35% of GDP on an annual basis (around 1,5 billion euros). Although efforts have recently been observed that led to better tax collection, we have a long way to go before channeling tax revenues from the gray economy into legal flows. The informal economy is somewhat justified when its actors are struggling for mere survival, but it is definitely worrisome when tax avoidance is used to enormously enrich individuals. • Household personal consumption accounts for as much as 75% of GDP and is its key component. Due to the impact of the corona virus, which paralyzed money flows, a significant drop in personal consumption is expected, which in the short term will lead to a drop in GDP and higher unemployment. The strong reliance on consumption as a generator of GDP growth is one of the most important reasons why the IMF announced a 9% drop in Montenegro's GDP, amounting to as much as 430 million euros. • Coverage of imports by exports is consistently low and amounts to 16%, which is one of the worst indicators in the world. This is a direct consequence of the neoliberal approach to the economy, which persistently pushes us away from strengthening domestic production, which is proving to be a strategic failure of this generation. • We stubbornly and persistently import huge quantities of food products and drinks that in most cases we can produce ourselves. While the deficit in these categories is constantly growing, the state agricultural budget has recorded a constant increase over the last few years, which clearly indicates either the majority of non-targeted spending of funds from the agricultural budget or a large number of missed investments in agricultural capacities. • The pension system records a constant deficit, which nevertheless has a downward trend. With the new crisis, the number of employees will decrease and this relationship will be even more unfavorable, which threatens the sustainability of the pension system in the long term. • The state's credit rating has worsened and it is now in the category of speculative debt, as a result of which it will be more difficult to realize future borrowings. It is to be expected that the credit rating will weaken even more due to the crisis caused by the corona virus. Interest expense, which in 2019 amounted to over 100 million euros, will increase further, so there will be less money left in the state coffers for financing necessary current expenditures. • A large part of economic activity is carried out through compensations, which endangers the liquidity of numerous economic entities. In the new circumstances due to additional lower liquidity, compensation will become a heavy ballast in business for many companies in a short time. • Internal and especially external migration (emigration from the country) has intensified, which threatens to disrupt the demographic structure of the population in the long term. • The state administration has swelled quantitatively to the extent that the quality people who run the processes simply get lost in the complex labyrinth of intertwined personal interests of others. The enormous increase in employment in the state administration leads to an increase in current spending that was financed by tax rate increases and new borrowing, which has now come to an end. • Little Montenegro has 24 large local governments, 17 of which fill their budgets from the Equalization Fund, so their financing is questionable during and after the corona crisis. • For years, Montenegro spent more than it earned; the deficit of the current budget was financed by new borrowings, while the surplus of the total budget became a theoretical thought noun. • The financial system is the strongest part of the overall economic system of Montenegro. The most important systemic indicator, capital adequacy of banks, is 18%, while the legal minimum is almost twice as low, which means that banks have a significant capital reserve for crisis management. Therefore, banks and the IRF will be a key ally of the Government in combating the crisis caused by the coronavirus.

Inadequate response of the state to the crisis

Montenegro recently lost its independence in conducting economic policy. The theoretical models of the neoliberal fictionists, which we have listened to all these years, collapsed like a house of cards under the pressure of real life. The neoliberals now seem to have a new philosophy: strategic silence and waiting for all this to pass, in order to once again ride unbridled on the megatrends of empty talk that still cannot pay the bills or control public finances. Subsequent rapid and significant adjustments of the Montenegrin economy will be necessary because the world will not be the same after the corona virus. If there is little intervention in the short term, as is the case now (it is the middle of April, there is still no money in sight from the state), there will not be much left of the economy that can adapt to the new reality and that can speed up the recovery of Montenegro after curbing the corona virus. When the factor of great uncertainty regarding the duration of the crisis caused by the corona virus is applied to all of the above, I hope that it is also clear to the layman why the "heavy" direct subsidy measures of around thirty million euros that have been adopted so far are simply lukewarm, late and insufficient to mitigate severe consequences of the economic disaster that awaits us in the foreseeable future. The author is the CEO of Fidelity consulting