Montenegro, along with Bosnia and Herzegovina, has the worst credit rating in the Balkans according to the latest ratings from Standard & Poor's (S&P) with a B+ rating, which is described as "speculative creditworthiness, high credit risk."
Albania and North Macedonia have a BB- rating from the same agency, one notch above Montenegro. Serbia has an investment credit rating of BBB-, four notches above. Croatia, with an A- rating, is seven notches above Montenegro, and Slovenia, with an AA-, ten notches above.
The credit rating affects the future debt of the state and the amount of interest, that is, those states with a lower rating will pay higher interest rates. This is an important fact considering that Montenegro must repay old debts of 821 million euros this year, 2026 million in 353, and 2027 million in 971, or 2,2 billion euros in three years through new debts.
They boasted about staying low in ratings
In early March, S&P confirmed that Montenegro would retain this low credit rating with a stable outlook, meaning that they expect it to remain at this low level for the next six months. If they expect an improvement in the credit rating, the agency assigns a positive outlook, and if they suspect a possible downgrade, the outlook is negative.
The Government and the Ministry of Finance presented this retention of a low credit rating with a "stable outlook" as a great victory, even though almost all neighboring countries have overtaken us.
"The confirmation of the country's credit rating is an encouraging result and an incentive for the continuation of positive economic trends, which will also mean improving citizens' standards, attracting larger investments, implementing significant capital projects and other positive developments," the Ministry of Finance said in a statement at the time.
Main economic indicators are falling
They also stated that investment remains a key driver of growth, supported by ongoing projects in the real estate, energy and tourism sectors, which continue to attract capital.
However, official statistical data show that Montenegro has trends of increasing trade deficit, declining tourism revenues, decreasing foreign direct investments, and that GDP has begun to slow down in the last three quarters.
"The S&P report also states that Montenegro's credit rating could improve if fiscal results exceed current forecasts, with a downward trend in net public debt. This could be the case if strong economic growth is achieved," the Ministry said in a statement.
Current fiscal results are below predictions, and Montenegro is not experiencing a decline but rather an increase in net public debt, and according to the fiscal strategy, net public debt is expected to grow from 4,12 billion to 5,5 billion in 2027, or from 58,5 to 63,8 percent of GDP.
Hard to reach planned growth of 4,8 percent
In its fiscal strategy for this year, the government predicted GDP growth of 4,8 percent, or a full percentage point more than the plan for the previous year. Next month, the eight-month production shutdown of the Pljevlja Thermal Power Plant will begin, during which Montenegro will be a major importer of electricity. With the continued decline in tourism revenues and foreign investment, and the growing trade deficit, it will be difficult to meet this forecast.
Last week, the government adopted information that allows the state to borrow up to 900 million euros by issuing bonds. By the end of the month, the government plans to borrow up to at least 500 million, because the old debt of 500 million from 2018 is due for payment at the beginning of April. The interest rate on this debt will only be known when the bonds are issued and their buyers submit offers in which they will state the amounts of the yield - interest, and the Ministry of Finance decides whether to accept them.
However, given that there is no other way to repay the debt that falls due in April, the Government does not have much room to choose other debt options.
Since the referendum, it has fallen three places, while Serbia has risen three.
Montenegro had the best credit rating according to S&P in 2007, which was BB+. That is, at that time it had a rating three levels higher than it does now and one step away from moving to the investment grade rating without speculative elements.
Serbia had a BB- rating that year, two notches below Montenegro. In the meantime, Serbia has advanced three levels, while Montenegro has fallen three levels.
Montenegro had better ratings than it has now in 2008, 2012, and 2013, and the same as now in 2014, 2016, 2017, and 2020. In 2021, it dropped one notch to B and stayed there until August last year, when it returned to B+.
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