Montenegro has made some progress and is moderately prepared for the development of a functional market economy. Strong economic growth and one-off revenues supported a small budget surplus in 2023, but fiscal vulnerabilities remain due to high public financing needs, elevated interest rates, and ongoing pressure on social spending.
This was stated in the latest report of the European Commission (EC) for Montenegro
"The situation on the labor market has improved, but structural problems still exist. The banking sector remains well capitalized and liquid. Some progress has been made in improving the business environment and preparing the reform of state-owned enterprises. Recommendations from the previous year have been partially implemented, but mostly remain relevant In order to improve the functioning of the market economy, Montenegro should adopt and implement additional fiscal measures that would help to achieve a budget deficit below 3% of GDP and reduce the public debt to the level of 60% of GDP by 2026. to implement the Law on Budget and Fiscal Responsibility in order to establish a fiscal council, while ensuring complete transparency in the selection of council members, and to prepare an analysis of the economic and fiscal impact of existing tax exemptions and an assessment of the fiscal risk of state-owned enterprises," the EC said.
It is further stated that Montenegro has made limited progress and is moderately prepared to face competitive pressures and market forces in the EU.
"The education system still has numerous challenges, as shown by the results of international research. Efforts in the direction of green and digital transition have continued, but there are significant infrastructural deficiencies. Further efforts are needed to diversify the narrow production sector of Montenegro. Obstacles to increasing the productivity and competitiveness of local companies include the low added value of domestic products, the small size of local companies and their low level of participation in exports. The Commission's recommendations from last year have been partially implemented and remain relevant , small and medium-sized enterprises and to prioritize the development and application of interactive e-government for transactional electronic services, to improve programs of dual professional education and training, as well as tertiary education, in close cooperation with business associations, providing work-based education, improve institutional and regulatory environment for the green transition and increase energy resilience by adopting the National Plan for Energy and Climate, as well as implementing the law on energy efficiency," the Report stated.
The EC assessed that Montenegro is moderately prepared in the area of financial control, but limited progress has been achieved. Certain efforts have been made to strengthen the function of centralized budget inspection in the Ministry of Finance. Delegation of authority in the area of financial management and internal control remains limited.
"The Commission's recommendations from the previous year have been partially implemented and mostly remain relevant. In the coming year, Montenegro should in particular additionally operationalize the centralized function of budget inspection in the Ministry of Finance, through the provision of appropriate personnel, expand the application of managerial responsibility in public administration, with increased delegation authorizations in the area of financial management and internal control, and to additionally align its legislation with the EU legal acquis in the area of fraud prevention related to EU financial interests, through: adoption of amendments to the Criminal Code, further capacity building of the National Anti-Fraud Coordination Service and adoption a new national anti-fraud strategy for 2024," the report states.
Montenegro is moderately prepared and has made some progress in the area of economic and monetary policy. The implementation of the action plan for alignment with the EU acquis has progressed.
The Commission's recommendations from the previous year were partially implemented and mostly remain relevant. In the coming year, Montenegro should continue with the implementation of the revised action plan for alignment with the EU acquis within this chapter and ensure that the Ministry of Finance, the Central Bank of Montenegro and Monstat cooperate with each other and coordinate activities, as well as that they have the appropriate capacities for the production of public finance statistics and fiscal notifications in accordance with the ESA 2010 methodology," the report states.
In the chapter on energy, it was stated that Montenegro has achieved a good level of preparedness in that area, but limited progress has been achieved through the development of the National Plan for Energy and Climate and the implementation of renewable energy projects.
"Montenegro is significantly behind in the development and adoption of the National Energy and Climate Plan, alignment with the EU legal acquis on mandatory oil reserves and alignment with the Electricity Integration Package. The Commission's recommendations from last year were only partially implemented and remain relevant for the most part. year, Montenegro should complete and start implementing the National Energy and Climate Plan, in accordance with the goals of the Energy Community in the field of energy and climate; adopt and apply the Law on Energy, which transposes the Electricity Integration Package, and the Law on Security the supply of petroleum products, with the appointment of a body for stocks of mandatory oil reserves, as well as to speed up alignment with the Directive on the energy performance of buildings and implement energy efficiency goals in accordance with the wave of EU renewal," the Report says.
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