The Montenegrin economy has recorded favorable dynamics of economic activity at the beginning of this year, while economic growth is in line with the expectations of the Ministry of Finance, said the relevant Minister, Novica Vuković. "Real economic growth in the first quarter amounted to 2,5 percent, which is above growth in the EU and the eurozone," said Novica Vuković at a consultative hearing on the topic of Gross Domestic Product (GDP) Growth and the Impact on Financial Sustainability at a session of the Parliamentary Committee on Economy, Finance and Budget.
For comparison, he said that the EU economy grew by 1,6 percent annually.
"This is in line with the expectations of the Ministry of Finance, as the global and European economies are slowing down, and the International Monetary Fund (IMF) has revised down growth for numerous countries in its latest report. Global economic uncertainties must also be reflected in Montenegro, given its strong trade and investment ties with the EU and countries in the region," explained Novica Vuković.
If we look at the structure of growth, the biggest jump was recorded in investments and private consumption, which shows, as he assessed, that economic fundamentals are still stable and strong, that is, that there is macroeconomic stability.
"All current liabilities are financed from current revenues. Sustainable growth is ensured through a combination of fiscal reforms, reduction of the shadow economy and growth of budget revenues," added Novica Vuković.
He said that tourism saw a 3,4 percent increase in arrivals in the first four months.
"The labor market is extremely dynamic. The unemployment rate is in single digits for the first time and is 9,91 percent, which is the lowest level since the Employment Service (ZZZ) records began," said Novica Vuković.
The average net salary, according to him, has exceeded one thousand euros and is growing at a rate of 22 percent.
"Net inflow of foreign direct investment (FDI) recorded a growth of four percent in the first quarter. The banking sector is stable, liquid and highly profitable," said Novica Vuković.
Inflation, he specified, has slowed significantly during the term of this Government, from a record 13 percent in 2022 to nine percent in 2023, while last year it was 2,2 percent.
The President of the Society of Statisticians and Demographers (DSD), Gordana Radojević, said that based on the trends, it can be concluded that economic developments are not very favorable.
"Society has come to depend on foreigners or those who want to work here. The number of foreigners increased due to the war in Ukraine, when we experienced a boom. As the number of foreigners decreased, economic activity decreased. This is a demographic problem," explained Radojević.
She stated that economic activity has been slowing down not only in the first quarter, but since the second quarter of last year.
"All vital sectors in the economy are recording a decline, such as agriculture, finance and real estate, while growth exists in certain services," added Radojević.
She announced that cumulatively, prices increased by 2019 percent compared to 33, and by 22 percent in the EU, and they are faced with the same global factors, only they have experienced an increase in electricity prices.
"Food and non-alcoholic beverages have increased in price by 50 percent compared to 2019, and by 33 percent in the EU," said Radojević.
Fidelity Consulting CEO Miloš Vuković recalled that the European Commission said that GDP growth would be half as low as the Ministry of Finance's projection.
"We are expecting a reduction in tax expenditures, and we can already see that these are service contracts, but that will not be enough. Montenegro will grow slower this year than all the countries that want to join the EU," said Miloš Vuković.
He said that, despite the fact that consumption was 'pumped up' through an increase in mandatory costs, on the basis of which citizens took out huge loans, Montenegro has the lowest growth rate.
"When that consumption stops, we can say that Montenegro is in recession," says Miloš Vuković.
He stated that Montenegro will have the lowest growth rate next year, according to the European Commission.
"Last year, we had a growth rate of 4,4 percent in the first quarter, and three percent annually. This year, growth in the first quarter was 2,5 percent, so we can say that it will be below two percent annually," said Miloš Vuković.
He stated that all documents predict a growth of 4,8 percent.
"I think you will have to change the Fiscal Strategy and all other documents to make this assessment effective. The economy will grow from the lower growth scenario in the Fiscal Strategy," added Miloš Vuković.
According to him, there has been a drastic slowdown in economic activity.
Europe Now Movement (PES) MP Tonći Janović said that he has the impression that concern about the economic situation in the country is being feigned in order to score cheap political points, and that he hopes that citizens have not forgotten how they lived before the implementation of the Europe Now 1 and 2 programs.
"Did you convene thematic sessions when the average salary increased by 40 euros in ten years, the minimum wage was 222 euros, when pensioners received a meager 145 euros, and their pension increased by 17 euros in ten years, when the public debt increased from 1,4 billion in 2011 to 4,4 billion in 2020? You didn't, and I think you should have," said Janović.
He added that at the time, the state could not finance such a "miserable standard of living" of its citizens from current revenues, which is why it went into debt. According to him, this would not have been a problem if the money had been used to build roads, schools or hospitals, but rather to "plug holes" in the budget.
"Even then, there was no reason to convene thematic sessions," said Janović.
He recalled that the previous government, through the 2014 tax reform, introduced taxes on SIM cards, electricity meters, and cable connections, and through the 2017 fiscal strategy, increased the general value-added tax (VAT) rate from 17 percent to 21 percent and reduced salaries in the public sector.
"This government has not directed a single cent of its debt towards current spending, but rather towards repaying old debts and implementing capital projects, reducing public debt from 110 percent to around 65 percent, and growing the economy," Janović said, adding that Montenegro's credit rating was increased twice during the government of Prime Minister Milojko Spajić.
He also believes that retail chains in Montenegro had no reason to increase prices, other than greed for higher profits, but that the entire region is facing this problem.
"The top five largest retail chains in Montenegro last year generated revenues of 1,1 billion euros or 8,5 percent more, while total turnover was 36,5 million or 11,6 percent more. So they are not damaged and this problem must be discussed," Janović said.
MP from the Civic Movement URA, Miloš Konatar, said that Montenegro's fiscal strategy is based on 4,8 percent growth, while projections indicate growth of 2,3 percent, which means that this should be a warning.
"The numbers do not confirm that people have never lived like they do now," said Konatar, warning that the Pension Fund's deficit currently amounts to 155 million euros.
He believes that we should not "bury our heads in the sand" in the face of problems, because they will come back to haunt future generations.
"We have to put our finger on the pulse, because the consequences of bad decisions will come to us, and then no one can be happy," Konatar said, calling for people to get out of the political-party trenches and reach joint solutions.
Democratic Party of Socialists (DPS) MP Nikola Milović warned that the starting point was the wrong assumptions - that economic growth would be 4,8 percent, and in the end it would be around two percent.
"This shows that the Montenegrin economy is slowing down. You cannot live better and work less. When that formula is applied, the results are devastating," Milović said.
He warned that citizens' expectations about continued wage growth are being further fueled, which, he said, will not happen.
"We are becoming static, and the question arises where the development function is," Milović said.
He believes that the Montenegrin economy needs cuts, which will be painful, but that otherwise it will slide towards increased indebtedness and the inability to repay loans, which is a scenario that can be expected in 2027 or 2028.
"We need to see what the pillars of our economy are, we need to protect and strengthen them, and base our future development on that," said Milović.
The Deputy Prime Minister for Economic Policy and Minister of Economic Development, Nik Đeljošaj, was invited to the hearing, but did not attend.
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