The standard of the average citizen for the past 13 years since the restoration of independence, even according to official statistics, has not improved significantly, and the main reason for this is the cumulative inflation, which for this period amounts to 40,7 percent.
Statistics show that life was good in the first three years after independence, as the average salary rose from 282 euros in 2006 to 463 euros in 2009, which is a growth of 64 percent, while at the same time inflation was 20 percent for that period. In almost all years after that, inflation is higher than average wage growth.
Then there is a change in the methodology, so the previous compensation of 55 euros for a hot meal and transportation starts to be counted in the average earnings. This means that the average salary in 2006, if we were to look at it according to the new methodology, amounted to 282 euros plus this compensation, or 337 euros. When we add inflation to that amount, it means that for the current amount of earnings of 472 euros we can buy the same amount of goods and services as for 337 euros 13 years ago. The current average salary is 510 euros, and it is realistically higher by only eight percent than the actual salary from 2006.
Most do not experience any growth
However, even that growth is questionable and based on other statistical data, it can be concluded that the majority of citizens did not feel it. Data on poverty warn that the gap between the richest and poorest citizens is increasing, that is, that the 20 percent of the richest are significantly increasing their assets in contrast to the 20 percent of the poorest. Officially, 25 percent of employees receive a salary higher than the average, while 40 percent of employees work for less than 250 euros.
The average salary from 2009 of 463 euros is in real terms higher than the current salary of 510 euros, because inflation has been 20 percent since then.
If someone works now for the same amount of salary as in the year of restoration of independence, he can buy 40 percent less goods and services for it.
In the past 13 years, inflation was negative in only two years, 2014 and 2016, and in the others it was around three percent on average. Inflation was the highest in the year of the so-called economic boom in 2008, when the cost of living rose by 8,5 percent.
If someone works now for the same amount of salary as in the year of the restoration of independence, he can buy 40 percent less goods and services for it. If someone then worked for a salary of 500 euros, it would have to be 700 euros now to be at the same level of purchasing power.
Montenegro lives on tourism and borrowing
Statistics show that for the past 13 years, Montenegro has predominantly lived on two inflows of money - borrowing and the growth of tourism. The public debt increased from 700 million, which was at the end of 2006, to the current three billion. At the same time, the gross domestic product increased from two billion to 4,6 billion. GDP grew by 130 percent, and public debt by 327 percent, that is, Montenegro's debt is growing two and a half times faster than its economy.
In this amount of public debt of three billion, only 500 million refers to the construction of the highway, and from the figures it can be concluded that even more 500 million refers to other smaller investments financed from debt. This means that two billion went to finance current spending, that is, the army of civil servants.
Tourism is becoming an increasingly powerful branch of the Montenegrin economy and one of the few with stable growth. The number of overnight stays by tourists increased from six million in 2006 to last year's 12,9 million. Relying the economy of a country dominantly on tourism carries significant risks because it depends on many factors such as weather, security, climate changes,...
Fewer workers in industry, growing state administration
The number of employees has increased from 2006 to 150 thousand since 195. Here too, in the meantime, there has been a change in the methodology of counting employees, because since 2009, foreigners hired under any form of contract have also been counted. The numbers of employees by sector show that the structure of the Montenegrin economy has changed significantly. In 2006, there were 26 workers in the industry, and now there are 12,7, while the number of employees in the state administration sector has increased from 10,3 to 21,8. The number of employees in construction increased significantly from 6,8 to 13,9 thousand, as well as in tourism from 10,9 to 16 thousand.
Since the restoration of independence, Montenegro has completed a major investment in the regional water supply, which solved the problem of lack of water on the largest part of the coast and now enables the construction of new and expansion of existing tourist settlements.
Two big investments since independence
The plant at the source of Bolje sestre and the first pipelines to the coast were completed in 2010, and since then its network has been expanding. So far, 110 million euros have been invested in it. Last year, the state-owned enterprise Regionalni vodovod got into trouble because it lost a dispute of 12 million euros, which slowed down the continuation of investments. At the end of April, the government approved a loan guarantee of 10 million to this company, which will enable the further expansion of the water supply network throughout the coast.
Another major investment launched after independence is the construction of the first section of the highway Podgorica - Kolašin. Unlike the regional water supply system, it will not be financially profitable, but as the government says, it is necessary to connect the state. Its need is not in dispute as much as the way in which the project was prepared, and the most significant problems that will increase its price is that the loan was contracted in dollars without credit risk insurance and that a large number of "subsequent works" appeared. These two items alone could increase the price by another 200 million euros.
Subsequent works and poor preparation also affected the extension of the construction deadline by 17 million euros. So far, a little more than 600 million euros have been spent on the construction of this section, and its completion will cost another 300 million.
Searching for oil, the result of four years
In independent Montenegro, a potentially large project was launched that could significantly change the Montenegrin economy in a few years, if it turns out to be successful, and that is the exploration of oil and gas (hydrocarbons) in the sea near Bar and Ulcinj.
In July 2013, the government officially started the implementation of the project by announcing a tender for the award of the concession. The result of that tender was the conclusion of two contracts, the first in September 2016 with the Italian-Russian consortium Eni-Novatek, and in March 2017 with the Greek Energiana. Government partners have completed 3D seismic surveys to date. It is expected that the Ministry of Economy will call for a second research tender, which is essentially different from the first one, as it will not include hydrocarbon production rights.
That tender will be intended for the so-called "multiclient geophysical companies" who will carry out seismic surveys of the Montenegrin seabed at their own expense and risk, and after conducting the surveys, the geophysical companies offer and sell the interpreted data to oil companies. The state will be the owner of the data, and through the contract, it gives companies the right to offer that data to a larger number of clients. If oil and gas are found in sufficient commercial quantities, the first oil platforms near the Montenegrin coast could appear in four years.
Big projects are growing - Luštica, Porto Montenegro, Portonovi
Since gaining independence, Montenegro has become more attractive to foreign investors who are particularly interested in investments in the tourism sector - new ports, luxury settlements, exclusive hotels are being built...
The three most important priority projects in the field of tourism are Luštica Bay, Portonovi and Porto Montenegro. According to official government data from January last year, around 890 million euros have been invested in these projects so far.
The Luštica Bay project envisages the construction of seven hotels, the first of which is already open, two marinas, more than 1.000 apartments, over 500 townhouses and villas, an 18-hole golf course,... The total value of the project is 1,1 billion euros.
According to government data from the beginning of last year, the Portonova investment reached 290 million euros, while the total projected investment is 650 million euros. The opening of the One&Only hotel has been announced for the summer.
The total financial effects from the implementation of the Porto Montenegro project amount to 479 million euros (data from January 2018), which is more than the total planned 450 million. So far, a total of EUR 308 million in capital investments and EUR 171 million in operating costs have been realized.
Despite the promise, payment transactions with Serbia remained expensive
One of the most important economic issues that has not been resolved since the independence of Montenegro, and is most often promised, is the establishment of direct payment transactions with Serbia. This neighbor is the most important economic partner of Montenegro, to which it sells a quarter of its exports, and from which 25 percent of the total number of tourists come. Mutual trade amounts to 600 million euros.
However, mutual payments are still made via London, Vienna or Frankfurt, which creates large additional costs for businessmen and citizens.
Banks charge citizens and businesses a minimum fixed fee of 10 to 15 euros for minimum amounts, and in percentages, depending on the amount, banks also charge up to one percent.
The total payment transaction between Montenegro and Serbia amounts to about 700 million euros, and because of the "intermediary services of the banks", as the businessmen of both countries pointed out, it costs them 10 million euros more.
Montenegrin and Serbian officials have been promising for years that the problem will be solved, but they have not moved further from the declarative on this issue.
The Vice Governor of the Central Bank (CBCG) Nikola Fabris stated in 2014 that there will be no direct and cheap payment transaction between Montenegro and Serbia until both countries are members of the European Union. It is the first time in these 13 years that a public official has said that there will be no payment transactions in the near future.
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