The average salary in 2024 will increase by five percent, according to the draft of the Economic Reform Program (PER) 2024-2026. for which the Ministry of Finance held a public hearing yesterday.
According to forecasts, inflation will amount to that much, so that there will be no real increase in wages in the coming years. For 2025, the same document predicts an increase in average earnings by four percent with inflation of 3,4 percent, and in 2026, incomes would increase by four percent with a price increase of 2,5 percent.
Pre-election program "Europe now" and the current prime minister Milojko Spajić it was promised that in the year after they take over the government, the minimum salary will be 700 euros, while the average salary will be 1.000 euros. As the new Government was elected at the end of October, this means that, according to the promise, this amount of earnings should have been reached in November of the following year.
According to the current forecasts of the Government from PER, the average salary at the end of the year will amount to 843 euros, and with all three planned increases at the end of 2026, it will amount to 911 euros.
In order for the average salary to amount to one thousand euros in November next year, it should have a growth of 25 percent in 12 months, and according to these forecasts, that amount will not be reached in three years.
PER goes to Brussels for evaluation
The adoption of the Program of Economic Reforms is an obligation of Montenegro arising from the accession negotiations with the European Union, and it is submitted every year to the European Commission (EC) for evaluation, which later monitors its implementation. Based on the fulfillment of obligations from PER, the EC assesses whether and how much Montenegro has progressed in economic reforms.
As announced yesterday at the public debate, the Government will adopt the PER by the end of the year and send it to the Parliament, which does not decide on it but only gets to know it, and then to the European Commission.
While the government announces absolute employment for domestic needs and the continuation of economic growth that should fill the state budget and lead to a strong increase in citizens' standards, the document to the European Commission mentions a symbolic increase in employment, a slight increase in productivity and a symbolic increase in earnings just a little above the inflation rate .
Real wage growth of 0,7 percent until 2026.
"In the period 2024-2026, an average employment growth of about 2% is predicted, with further wage growth, based on a slight increase in productivity in the private sector (estimated by potential growth), inflation growth and wage adjustments in the public sector. It is expected that in the medium term, despite ongoing inflationary pressures, the real average salary in the country will increase by around 0,7%, according to preliminary macroeconomic forecasts", the document stated.
The real growth of average earnings is obtained when the inflation rate is subtracted from the percentage growth of earnings. Thus, according to the forecast from this document, the real value of the average salary at the end of 2026 will be only 0,7 percent higher than the current one.
And this symbolic increase in wages will come on the basis of, as stated, a slight increase in productivity in the private sector and the adjustment of salaries in the public sector. For the next year, it was planned to harmonize salaries in education, state administration and the judiciary (about 38 thousand workers) by 10 percent, but the new government has so far refused to do so, while these unions are threatening strikes at the beginning of next year if what they have agreed with is not fulfilled. agreed by the previous government when signing branch collective agreements.
So that the burden of reaching the growth of the average salary of five percent falls on the growth of productivity in the private sector.
The program also foresees alternative scenarios if the expected growth in the consumption of domestic citizens, foreigners with temporary residence and tourists does not occur in the next three years.
"As the macroeconomic outlook in the short term is extremely uncertain and subject to fluctuations, it is necessary to develop an additional scenario of macroeconomic trends, which takes into account the eventual materialization of potential risks and challenges to medium-term growth. They refer to both the external and domestic environment, and dominantly include the uncertain geopolitical situation, further inflationary pressures, as well as domestic factors of stability of public finances and limited fiscal space," the document states.
The key assumptions of the alternative scenario of lower growth include a further worsening of the unfavorable outlook at the global level, a slowdown in the growth of EU countries' economies, a decline in the level of direct foreign investments, a deterioration of the trade balance, high reference interest rates, a high rate of inflation in the country, the lack of implementation of infrastructure projects and internal instability.
Six structural reforms are foreseen
Coordinator of the development of the PER, dr Bojana Bošković she said that the European Commission requested that Montenegro foresee the implementation of six structural economic reforms in this document.
The first structural reform is the improvement of the business environment and the formalization of the economy, which aims to encourage a better business environment, increase the number of companies, formal employment and state income. This would be achieved by implementing measures from the Program for Suppression of the Informal (Grey) Economy.
The reform of majority-owned companies by the state is also foreseen, by defining a clear strategic approach in the supervision of their work.
A reform is also planned that would increase energy resilience in the application of the green agenda, in order to comply with the energy and climate goals by 2030.
Other structural reforms are "Digitalization as a function of the sustainability of the economy", "Improving the framework for better employability of young people and higher quality of education" and "Increasing the effectiveness of the social and child protection system".
Šćekić: The biggest business barrier was created by the government, what will you do when the foreigners leave
In the part of the discussion about the PER proposal, only one participant, the President of the Assembly of the Union of Employers, spoke Slaviša Šćekić, who criticized the fact that the Government first seeks approval from the European Commission for the reform program without first obtaining approval from its citizens and employers, who, as he said, should pay for all of this.
"We should be more important to you than the European Commission", Šćekić said.
He stated that similar reforms on the abolition of business barriers and encouragement of entrepreneurship, digitization and better education have been written for years without any serious results.
"The biggest business barrier was created by the Government with a drastic increase in wages and large employment in the public sector. A private individual who has to earn money on the market cannot be competitive with the Government when it needs to hire and retain workers. Now everyone wants to work in the state administration, the salary is not below 900 euros, days off, holidays, you can go on sick leave whenever you want for several months... This is not available in the private sector, because you would go bankrupt", said Šćekić.
He also stated that education is not adapted to the needs of the market, and that this has been talked about for years.
"We have various graduate managers for anything and everything who can't cross the street. We lack not only skilled labor, but any kind of labor. They go to the public administration or out of the country. They leave not only because of lower wages, but also because of the overall environment. Foreign investments are wasted if we don't have workers. Now let someone build the three most luxurious hotels, how will they work, where will they find workers", Šćekić said.
He pointed out that the growth of the economy is based on the consumption of 120 thousand foreigners who are now temporarily staying in Montenegro.
"What will happen when they return home, and the war will stop once and for all. What will we then base growth and this much public spending on," Šćekić said.
According to him, essential reforms are necessary, but they must include the implementation of unpopular measures.
"Are you planning to reduce the public administration in these three years", asked Šćekić, stating that all these remarks of his are well-intentioned.
The representatives of the group that prepared the PER said that they are creating the document at the request of the EC, that the announced measures will be implemented, and that they take all remarks in good faith. However, they did not answer the question whether the public administration will be reduced.
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