The crisis caused by the coronavirus exposed the imperfections of our economic system, which was based on mutated neoliberal concepts propagated by the domestic state neoliberals, to the very essence, said economist and director of the consulting firm Fidelity consulting Miloš Vuković.
Vuković said that from the restoration of independence until the end of June 2012, Montenegro had an indisputable growth in economic indicators (salary and pension), and since then it entered a vicious circle of numerous failed investments, the growth of the public sector and current consumption, which all led to to extreme borrowing on the foreign market.
He also points to the problem that 70 percent of young people want to leave the country and their high unemployment rate, which has reached 27 percent, which is the third worst unemployment rate in Europe, and as one of the indicators of the inadequate growth model of the Montenegrin economy, he cites the country's credit risk, which was recorded in the category of speculative debt with a negative outlook.
Vuković warned that the growth of the Montenegrin economy was not well distributed among all segments of society - so that all citizens would feel the benefit of GDP growth.
"Paradoxically, the announced decline in the economy will be felt the most by those who benefited the least from the previous economic growth, while those who benefited the most from the previous economic growth will emerge from this crisis almost unscathed," warned Vuković.
For "Vijesti", Vuković answered questions about what has been (un)fulfilled in the economic sense since the restoration of independence in May 2006 until today, which are good and which are bad economic decisions, as well as how many wrong economic decisions from the past are today they cost, that is, how the current crisis charges those mistakes. He was asked about the growth of the public debt from 700 million in December 2006 to about 3,7 billion at the end of last year and the fact that after the restoration of independence, it was promised, among other things, that Montenegro would be without the unemployed...
Two periods and a vicious cycle
"From an economic point of view, the period from the restoration of the statehood of Montenegro to the present day should be divided into two time periods. In the first period, which lasted from May 21, 2006 to June 29, 2012, when Montenegro officially started the negotiation process with the European Union, there is no denying the growth of economic indicators: the average salary increased from 282 euros to 497 euros, while the average pension also grew, from 143 euros to 278 euros. It seems that the decision-makers at that time managed the economic processes and challenges that Montenegro was undeniably facing well. The second period, which lasts from the beginning of negotiations with the EU until today, is a completely different story. Instead of smartly and powerfully steering forward through a calm sea, and using the numerous economic benefits that EU integration brings with it, Montenegro has entered a vicious circle of numerous failed investments, unrealistic growth of public administration and current spending. All of this resulted in extremely strong borrowing on the foreign market, which, after the recovery from the economic crisis of 2008, was flooded with free money," Vuković emphasized.
He recalled that from 2012 to today, the average salary increased slightly from 497 euros to 524 euros, while the average pension symbolically increased from 282 euros to 289 euros. He adds that - while salaries and pensions have not grown enough, GDP has grown by 60%, and the public debt has more than doubled.
Paradox
"This set of data clearly points to the conclusion that the growth of the Montenegrin economy over the last eight years has not been well distributed to all segments of society. In order for all citizens to feel the benefits of GDP growth, it is necessary to properly distribute the new value that this growth brings. And this persistently does not happen in our country, which indicates a structural problem of the economic growth model of our country. Since there were no significant negative economic phenomena in the world until the emergence of the coronavirus, Montenegro did not use the previous stable period to diversify and strengthen its economy, which is why today we have a negative forecast of a huge 9% drop in GDP, announced by the International Monetary Fund ( IMF). Therefore, Montenegro is facing the biggest crisis in the last 100 years with huge public debt, an economic model that inadequately distributes economic growth to all segments of society, which will lead to even greater inequalities in society. "Paradoxically, the announced decline in the economy will be felt most by those who benefited the least from the previous economic growth, while those who benefited the most from the previous economic growth will emerge from this crisis almost unscathed," said Vuković.
He added that the public debt is only one of many data that show how much the economic situation in Montenegro has worsened in the last seven years, and it should be viewed in the context of other worrying data.
Unemployment
"It should be remembered that 70 percent of young people want to leave Montenegro, while the unemployment rate in this segment of Montenegrin society is as high as 27%, which is the third worst unemployment rate in Europe. We should not forget that in the last few years, VAT was increased from 17% to 19% and then to 21%, which led to an increase in the prices of most products and services for all citizens of Montenegro. In addition, the excise tax on fuel has been significantly increased, which is why we pay a very expensive liter of fuel", said Vuković.
He says that the information that funds in the amount of 611 million euros, which is 13 percent of GDP, have been blocked for more than a year "should cause heated discussions in professional circles: in Montenegro, this information is lightly passed over through obscure rhetorical attempts to downplay significance of this negative data".
"It is evident that there is a huge lag in the development of the northern region despite investments of almost one billion euros. The northern region actually has the highest unemployment (as much as 32 percent compared to the national average of 16%), as well as the fastest growing but fully justified intensive internal migration to the central and southern regions. There is simply no work in the north," said Vuković.
With the assessment that the crisis due to the coronavirus exposed the imperfections of the economic system, which was based on mutated neoliberal concepts propagated by domestic state neoliberals, Vuković concluded:
"Montenegro does not need an equaliser: it is certainly necessary to have rich individuals and companies that will push society forward with dedicated work. What I stand for is a fair distribution of the new value, which has not been the case so far. Montenegrin society, in its full strength, simply cannot function without moral (economic) ties, no matter how hard some people try to prove the opposite to us".
The government at Montenegro Airlines is trying to correct the mistake
Vuković said that there is no doubt that Montenegro airlines (MA) is important for the overall tourism economy (25% of the total tourists who come to Montenegro come specifically to MA).
"Nevertheless, the "pouring" of hundreds of millions of euros of illegally approved state aid to the largest tax debtor in the country represents a glaring example of a superficially assessed investment that derogated the dignity of the Assembly at the end of 2019, and the Government is now trying to correct its obvious mistake from December last year by establishing a new management and through a much more serious analysis of the sustainability of this company", believes Vuković.
The gray area is suffocating, the economy is too far from the EU average
The shadow economy, which is estimated at 1,5 billion euros annually, has grown so much that it simply prevents the development of new legal business ideas, while the state budget, as a result of a weaker filling, suffers serious financial consequences, Vuković pointed out.
"The credit risk of the country, which was reduced in 2016, was recorded in the category of speculative debt with a negative outlook, which is another indicator of the inadequate growth model of the Montenegrin economy, which, according to the forecasts of renowned international institutions, will reach the EU average in some 200 years. "Somehow laconically, we pass over the startling fact that we have been paying over a hundred million euros in interest on the public debt for years, while the foreign trade deficit recently reached an infamous negative record, jumping over the magic limit of 2 billion euros," Vuković pointed out.
The IMF warned of the increase in the cost of the highway for a quarter
Vuković pointed out that the IMF elegantly noted in its report that the cost of the loan for the priority section of the highway has increased by as much as a quarter, and that the realization of the entire highway project is questionable.
"Simply, for high investments such as the investment in the highway, the economy of a country should be much stronger than it is now the case with the economy of Montenegro. Everything should worry us and the IMF's "pack" that employment in the public sector increased by 1,2 percent, while the optimization plan predicted that the employment of the general government would decrease by 3,5 percent. The IMF additionally points out that the growth of wages in the state sector has consistently been higher than the growth of wages in the private sector for years," emphasized Vuković.
Less purchasing power
He added that the public debt has more than doubled in the last eight years, as it has increased from 1,7 billion to 3,78 billion euros in the last seven years.
"It's time to remind once again that average salaries and pensions have increased by only a few percent. If we add inflation to these data, which was higher than the growth of salaries and pensions, it does not take much intelligence to see that the purchasing power of the citizens of Montenegro is actually lower today than in 2012, while every citizen today owes twice as much as eight years ago. . Indeed, all the data systematized in this way represent a heavy burden for the design of an even more serious new economic policy that will have to be treated in the near future due to the coronavirus pandemic, which brutally "broke" the idyllic statistical picture of the impressive results of the Montenegrin economy, which was neatly placed superficially from small and big screens", said Vuković.
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