"GDP counts the special locks on our doors and the prisons for people who break in. It counts the destruction of the redwoods and the loss of our natural wonder to chaotic sprawl. It counts napalm and nuclear warheads and armored vehicles for police to fight riots in our cities. It counts Whitman's rifle and Speck's knife, and television programs that glorify violence to sell toys to our children. Yet the gross national product does not take into account the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public servants. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country - in short, it measures everything except what makes life worth living."
Robert F. Kennedy uttered these words back in 1968. In Montenegro today, these words sound completely contemporary, almost as if they were written for the present moment. Because in our country, too, GDP measures everything that is expensive and everything that is paid for from the pockets of citizens, and then that account is declared "progress."
If you look at the surface, the Montenegrin economy is truly a success story. According to Monstat, from 2021 to 2024, the value of the Montenegrin economy increased by about 2,7 billion euros. That sounds like a jump from which you would expect new factories, investments, private sector jobs, industrial development. But when you separate what is actually produced and what is just a price increase due to inflation, the picture changes dramatically.
Of that 2,7 billion euros of growth, about 1,66 billion euros is inflation or price growth, not production and productivity growth. Only about 1,04 billion euros represents real, real economic growth. More precisely: in these four years, inflation accounts for 62% of total GDP growth, while real growth is only 38%.
In other words, Montenegro did not become richer by 2,7 billion euros; Montenegro became more expensive by 1,6 billion euros. The difference is not economic, but life-changing. This is also the explanation why we see “record growth” on television, while our citizens feel anger, fatigue, and disappointment every day.
The above is best explained through real-life examples. You have been drinking the same coffee in the same cafe for years. Neither the coffee has changed, nor the size and shape of the cup. Only the price has changed: from one euro, a cup of coffee has reached one and eighty euros. You see, statistics see a strong growth in the hospitality industry in this, which affects GDP growth, and citizens see that every month they have fewer coins and paper bills left in their pockets.
The same absurdity applies to rents. A tenant who paid 300 euros for a one-bedroom apartment in Podgorica in 2021 is now paying 600 euros for the exact same apartment. Statistics show this as “real estate market growth” and, of course, GDP growth. For tenants, this means 300 euros less for food, children, bills, and far more worry about making ends meet.
Tourism best reveals the logic of inflationary GDP. A hotel room that cost 60 euros three summers ago now costs 120 euros. For economic statistics, the income is twice as high. For tourists, the cost is twice as high. Marketingly, it is a record season; economically, it is a season in which Montenegro has become more expensive, not twice as desirable, as a destination.
Finally, in construction, this phenomenon is completely exposed. A square meter of an apartment recently cost 1.000 and today it costs up to 3.000 euros. GDP is seeing an investment wave. In reality, no building is better, more beautiful or of higher quality. Only cement, iron, labor and land have become more expensive. And all of this, you guessed it, adds up to a “growth” in GDP.
That is why what seems to many to be a paradox is happening: if we are the fastest growing economy in the region, why are citizens living harder and harder? The answer is simple: inflation “pushes” GDP forward and citizens backward. GDP grows because life is expensive, not because we are more productive or innovative.
But that's just the beginning of the story. When growth is inflationary, the state is not richer; it is just more expensive to finance. That's why what happened in 2025 is completely logical: while celebrating GDP growth, the state had to borrow 1,5 billion euros in just one year, and since the beginning of the 44th government, a total of about 2,5 billion euros. This is a consequence of a model of economic development that is based on inflation and higher prices, rather than on production and innovation.
The economy is growing mostly through inflation, while the debt of the state and citizens is increasing.
Higher prices mean higher VAT, higher excise taxes and higher nominal budget revenues, but they also raise all state costs: healthcare, social programs, public procurement. Inflation eats into the budget just as it eats into wages; for this reason, the hole is covered with new, more expensive debt.
At the same time, due to a lack of money, state investments are at a lower level than in 2019.
The same logic applies to households. When prices rise faster than wages, people do not take out loans to live better, but to live the same, that is, to survive. Credit becomes an instrument for maintaining standards, not for improving them.
The most profound consequence of this model of economic development is not only debt, but inequality. Inflation does not affect everyone equally: those who already own property benefit, while those who live on a salary lose. That is why Monstat data shows that inequality in Montenegro increased in 2024, even though salaries and pensions have increased nominally. This is a perfect illustration of inflationary GDP: the state has collected more, people have received less, and investments are stagnating.
When nominal wages rise and the real purchasing power of citizens falls, you will agree that this is an economic illusion. Because inflation turns the "increase" into a price race that workers always lose.
It is also absurd that our GDP growth is compared to the GDP growth of France, Spain or Italy, as if they are even comparable sizes. The French economy is worth over 2.800 billion euros, the Spanish economy around 1.500 billion, the Italian economy over 2.000 billion. The Montenegrin economy - a little more than 7 billion. When a 7 billion euro economy grows by 4%, that is 280 million. When the French economy grows by 1%, that is 28 billion or a hundred times more than the Montenegrin one. Comparing these growth rates as if they were equivalent is the same as comparing the speed of a boat and a tanker. A boat may be faster in percentage terms, but a tanker transports goods. Montenegro has percentage, large economies have substance. And substance is not measured by the growth rate, but by how many people can live decently from their work. That is why in large economies salaries and pensions are higher, education and healthcare are better, and prices are lower than in Montenegro.
Kennedy said that GDP measures everything except what makes life worthwhile. Today we can add: inflationary pumping of GDP creates the illusion of progress, but in reality, increasing inequality and increasing debt. If the country's economic model does not change, the question is not whether we will borrow 1,5 billion euros again; the question is when, at what price and who will repay it.
To conclude: economic growth is not when coffee is more expensive, housing is more expensive, credit is bigger, and ultimately the worry about paying bills is deeper. Economic growth is when people can live decently from their work, and retirees from their pensions.
GDP will always register higher prices and inflation; however, GDP will not register healthier people, better education, trust in institutions, and human dignity. Only when growth starts to measure these things will we know that we have truly moved forward.
Until then, we are inflationarily stagnating.
The author is the CEO of Fidelity consulting
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