According to World Bank (WB) projections, the Montenegrin economy will grow by 2,8 percent this year, compared to last year's 4,4 percent, with a focus on further implementation of fiscal consolidation, improved tax collection and creation of new jobs through the private sector.
Senior economist of the SB, Sanja Madžarević Šujster, presenting the Regular Economic Report for the Western Balkans, announced that the entire region is expected to recover growth this year.
"In Montenegro, we expect a reduction in the rate compared to last year, which was the year when more than eight percent of gross domestic product (GDP) was allocated to investments in public infrastructure, which this year, due to such a high base, will not have the same effect on rate of economic growth", said Madžarević Šujster at the press conference.
She explained that this effect will spill over into next year, when the section of the Bar-Boljare highway will be completed.
Madžarević Šujster said that Montenegro should continue implementing fiscal consolidation and improved tax collection.
"On the side of strengthening growth and creating new jobs, there is room for increasing the productivity of the private sector, which should be the main generator of creating new jobs," added Madžarević Šujster.
Commenting on the Government's plans for the construction of the entire highway through a public-private partnership (PPP), she said that it was to be expected that the entire project would be completed at some point, because, as she assessed, 40 kilometers of the highway were not a completed investment.
"The announcement that PPP is being considered is a way to achieve two goals - complete the autopout and reduce fiscal risks. It is important to define the regulatory framework for PPP, in order to ensure compatibility with European standards and take into account all fiscal risks for the budget", said Madžarević Šujster.
According to her, it is an encouraging announcement that the Government is thinking about passing a law on PPP soon.
"Last year, in Montenegro, there was a major withdrawal of funds for the construction of the highway, and thus the public debt remained at a fairly high level. This year too, we expect the continuation of such trends, which means that an additional increase in the public debt is expected," Madžarević Šujster assessed.
The SB report refers to Montenegro, Albania, Bosnia and Herzegovina, Kosovo, Macedonia and Serbia.
Madžarević Šujster said that this region continued to grow last year, albeit at a slower pace.
"The average growth for the Western Balkans decreased from 3,1 percent in 2016 to 2,4 percent last year. Of the countries in the region, the highest growth rates were recorded by Kosovo and Montenegro, at 4,4 percent each, mostly driven by large investments in public infrastructure," said Madžarević Šujster.
Serbia, due to negative shocks due to bad weather, achieved a lower growth rate than in 2016, and the agricultural sector suffered significantly.
"Another country that was a negative surprise is Macedonia, which due to the prolonged political crisis had no growth last year, that is, that growth was positive zero," stated Madžarević Šujster.
The growth in the region, as she explained, was mostly due to the recovery of consumption and increased investments in public infrastructure.
In the entire region, there has been increased job creation, as well as employment rates and labor force participation in the labor market.
"About 190 jobs were created in the region in the first nine months of last year. There have been some structural changes in the labor market, among which the youth unemployment rate has decreased, which is very significant," said Madžarević Šujster.
According to her, Montenegro had the biggest gain from the export of services, i.e. tourism.
Jobs in the region were mainly created by the service sector, i.e. trade, tourism and agriculture, but not so much by the manufacturing sector.
"External imbalances increased in the region last year, which means that there was an increase in the deficit on the current account, which is also the case in Montenegro," added Madžarević Šujster.
She also announced that in the entire region there was a relatively stable share of foreign direct investments in GDP, and in Montenegro and Serbia they even increased.
"This means that it was necessary to borrow less abroad and thereby stabilize the external debt of the Montenegrin economy," said Madžarević Šujster.
Last year, the entire region recorded inflation of around 2,3 percent, compared to 0,5 percent in 2016.
"Although inflation has increased, real wages have also increased in almost all countries of the Western Balkans. In Montenegro, there was no further increase in real wages, mainly due to the Government's decision to reduce salaries in the public sector", stated Madžarević Šujster.
According to her, this year, the region is expected to have increased lending to companies, as most banks managed to reduce non-performing loans last year, the average of which for the entire region is below nine percent.
As she stated, Montenegro should revise tax exemptions and rationalize and improve the quality of public spending.
This refers to the optimization of employees in the public sector, the reduction of early retirement options, the improvement of public investment management and the implementation of the procurement reform.
"Low productivity should also be strengthened by solving the indebtedness of the corporate sector, market concentration and the inclusion of young people," concluded Madžarević Šujster.
For the next year, the SB predicts growth of the Montenegrin economy of 2,5 percent, which is the lowest in the region.
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