A better standard of living for all citizens - imperative of the Government of Montenegro

When the 2020nd Government of Montenegro began its mandate in December 42, the inherited state of Montenegrin society was a high rate of risk of poverty for our citizens. Namely, according to Eurostat data, every fourth citizen of Montenegro lives at risk of poverty, which, unfortunately, is the worst indicator on the European continent. By comparison, in the Czech Republic only one in ten citizens lives at risk of poverty. Additionally, when looking at inequality in Montenegro, which, let's be honest, is visible to the naked eye, the indicator that measures inequality, the Gini coefficient, is among the highest in Europe. This speaks in favor of the fact that the newly created value expressed through GDP growth in the previous multi-year period in Montenegro was not evenly distributed. On the contrary, the differences between rich and poor citizens have deepened significantly.

The global economic crisis caused by the covid pandemic further worsened the parameters that treat poverty and inequality. The historically largest drop in economic activity of 15% last year (also the largest in Europe), was accompanied by an increase in the illiquidity of the economy and an increase in unemployment, which ultimately led to a record deficit in the budget of about 450 million. euros, or 11% of GDP. Montenegro narrowly avoided bankruptcy, which is why we are especially proud of the successful issue of bonds in December 2020, with which the new government successfully stabilized public finances.

The crisis caused by the covid pandemic actually clearly pointed out all the economic weaknesses and shortcomings of the Montenegrin economic system, which the previous governments either failed to deal with or simply did not want to deal with sufficiently. Excessive dependence on tourism, which accounts for a quarter of economic activity, insufficient productivity and weak competitiveness of the economy precisely illustrated by the largest trade deficit in Europe, high long-term unemployment among young people with a simultaneously present labor force deficit in certain areas, a significant participation of the gray economy, a strong demographic crisis with negative trends, high public and foreign debt, evident regional disparity, the second worst credit rating in Europe, as well as the lack of rule of law, are just some of the accumulated problems of the Montenegrin economy.

The tough job of adapting the economy to the post-pandemic reality is now upon us. In this sense, the Government has initiated numerous reform activities that will be effective through the Economic Recovery Program, as a key strategic determinant for generating more dynamic economic growth and development and creating new jobs. The program will be based on the diversification of the economy, investments in infrastructure and the green economy, remediation of the demographic crisis, structural reforms in the areas of tax policy, improvement of corporate governance, digitization, suppression of corruption, the fight against the gray economy, better social and health care, improvement of market conditions work, reducing regional differences, improving a predictable business and innovation environment. In short - The economic recovery program aims to build a stronger, more resilient and fairer economy of Montenegro, which must certainly be fundamentally better than the one we inherited.

It is clear how difficult the work is before us. Of course, the Government of Montenegro has the political will to fight the aforementioned economic anomalies, which it has so far demonstrated through concrete actions. Despite the recession and the inherited unfavorable situation in public finances, decisive cuts in unnecessary spending that characterized previous budgets, we achieved significant results: we did not increase taxes, social benefits were not reduced, while some were even increased, salaries and pensions remained at the same level , and we saved citizens and the economy from new levies. Montenegrin citizens and businessmen well remember the earlier constant increases in VAT, the introduction of a crisis tax, numerous parafiscal levies and even fees for SIM cards and electric meters. This government did not introduce similar measures, even though today's situation is many times more complex than in the years when previous governments introduced such levies. It is also worth noting the fact that the new government adopted two large packages of measures to support the economy and citizens in the fight against the economic consequences of the covid pandemic in a short period of time. More than 320 million euros were invested in measures that helped preserve jobs through subsidizing wages in endangered industries. In addition, through concrete financial support and reduction of electricity bills, we helped vulnerable categories of the population (almost a fifth of the citizens of Montenegro). No less important, the Government launched strong support in terms of incentive benefits for new employment of workers from the Employment Office.

Additional attention to the fight against poverty is given in the budget for 2021, which has an emphasized social dimension. The government introduced a universal child allowance for children up to the age of 6, and provided free textbooks for all primary school students. This is truly the best investment in the economic future of Montenegro because education and stronger childcare is the key to the social recovery of our country.

By increasing the minimum net salary to 250 euros, from the previous 222 euros, the Government has shown that it wants to create a socially inclusive society and reduce extreme differences in income. Within the Ministry of Finance and Social Welfare, the Directorate for Social Justice was established, which will be responsible for the fair and legal distribution of aid to the most vulnerable citizens. Unlike our predecessors, this Government has never and will not use funds from the budget reserve for personal and party interests that indirectly bought elections, but will direct state support to those who need it most. And unfortunately, the previous governments left us with a lot of such. The Government also initiated the drafting of the Law on Settlement of Obligations to Former Workers from the Mining and Metal Industry, all with the aim of correcting the injustice committed by previous Governments.

In the context of the limitations of the Montenegrin monetary policy implemented by the Central Bank of Montenegro, the Government responded promptly to the rise in the prices of basic foodstuffs by taking measures to protect the most vulnerable, as far as possible: it limited the price of white wheat bread, reduced the VAT on eggs (from 21% to 7%) ), and made recommendations on limiting trade margins. Also, the Government distributed significant quantities of oil to the most vulnerable citizens. Of course, we know that is not enough; in the coming period, the government will continue to provide support to materially disadvantaged citizens through the creation of social programs for certain categories of the population. At the same time, the creation of a transparent social card is the Government's priority.

Certainly, key support for the Government's social policy will be provided by the expected economic growth in 2021, induced by the great results of the tourist season, which we are particularly proud of. Only a few months ago, few people believed in the Government's already achieved projections about the realization of the tourist season, after the disaster that befell our tourism last year due to the decisions of the previous authorities. A successful tourist season, in another pandemic year, is the main driver of economic growth in Montenegro. These results show how, thanks to the smart and timely decisions of the Government, a strong recovery of the Montenegrin economy can be realized, which is now a good base for further support of the Government's social and economic policy.

According to the data available so far, the realization of the budget for the first half of the year exceeded the plans; deposits in the banking sector (as a good reflection of the trends in the tourist season and the economy in general) at the end of July this year were at a historical maximum and by 12% higher compared to the end of July 2019. That is why the banking sector will be our main partner in the coming period stabilization, recovery and development of the economy, among other things through the Credit Guarantee Fund, which we are actively working to activate, as well as through fairer and more efficient investments by the Investment Development Fund, which in the previous period served the party interests of the former ruling structure, which unwillingly spent financial resources of the IRF, which is why its reach in the context of providing support to the economy is reduced today.

The government has the decisive political will, necessary knowledge and strong discipline to fight against poverty and inequality through more dynamic economic development and fairer social policy. Increasing the standard of living and taking care of socially vulnerable categories have been a historic task of the new Government since the beginning of the mandate. It will stay that way! At least until we reduce the number at risk of poverty from the beginning of this text to that in the Czech Republic!

To implement undeniably difficult reform measures, we will need a lot of joint work, mutual trust, understanding, effort and responsibility. We must strive for cohesion in Montenegro, which must never again be a country where every fourth citizen is at risk of poverty. The newly created value must be fairly distributed in order to provide a long-term better standard of living for all citizens of Montenegro. This is our obligation to all citizens of Montenegro, which we must fulfill at any cost.

The author is the Minister of Economic Development in the Government of Montenegro