Inflation in Montenegro is not only imported, but there are significant domestic reasons, as the price growth rates in Montenegro over the past five and a half years have been significantly higher than in the eurozone countries. A significant reason is the increase in duties on some products and services, as well as the fact that labor costs have increased by 55 percent compared to 2019, while productivity has increased by 13,7 percent. We also have the so-called greed inflation, because some traders and service providers have increased prices beyond their actual expenses because a significant number of foreigners with higher payment capabilities reside in Montenegro.
This was stated by the president of the Society of Statisticians and Demographers, Gordana Radojević, at a control hearing on the issue of inflation, based on the research and analysis they conducted, at the parliamentary committee on economics.
She cited examples of how food prices in Montenegro have increased by 50 percent in the past five and a half years, and by 33 percent in the eurozone countries (countries that use the euro), and that pharmaceutical prices have increased by 36 percent and by 11 percent in the eurozone. General medical services in Montenegro have increased in price by 35 to 52,6 percent, and by nine to 11 percent in the eurozone. Radojević stated that the prices of bread, meat, fruit and vegetables have increased in Montenegro at rates that are two and a half to three times higher than in the eurozone. Similar differences in price growth rates exist for clothing and footwear, personal care services, housing, etc. Only electricity has increased in price by 4,1 percent in Montenegro in five and a half years, and by 41 percent in the eurozone.
Radojević pointed out that despite the reduction in payroll taxes, the cost of labor for employers has increased, because in 2019 the average gross salary (employer's cost per employee) was 773 euros and now it is 1.200 euros, i.e. it has increased by 55 percent, and productivity by 13,7 percent. She stated that the economy could not withstand the growth of these costs without increasing the prices of its products and services.
She pointed out that when you increase wages through administrative measures at a significantly higher percentage than productivity growth and previous inflation, an inflationary spiral is created, that is, when you increase wages in this way, inflation occurs that devalues them, so employees demand a new wage increase, and that it is difficult to escape from this vicious circle.
Economic analyst Miloš Vuković said that inflation is a mechanism for the state to collect more money, because with changes to the tax system, namely the abolition and reduction of contributions, 50 percent of the budget is now filled from VAT and another 15 percent from excise taxes.
"Two-thirds of VAT comes from charges on products when they are imported. That is, the larger the import and the higher the prices, the more the state charges," said Vuković.
He pointed out that what is happening in Montenegro now is something that has never been recorded anywhere, namely that wages and pensions are growing nominally, while at the same time there is a rise in inequality and an increase in the percentage of the relative poverty risk gap.
"The reform that was supposed to strengthen the middle class actually melted it away," said Vuković.
Committee Chairman Boris Mugoša pointed to the committee's previous conclusions that were sent to the Government - to increase state subsidies for economic competitiveness, to increase the agricultural budget, to reduce VAT on fruit and vegetables and analyze the possibility of reducing it on meat products, to continue the stop inflation campaign, to force retailers to highlight domestic products, as well as to highlight the previous price of that product on prices,... He said that all of these are examples from EU countries and the region.
Deputy Prime Minister and Minister of Economic Development Nik Đelješaj stood by his claims that inflation in Montenegro is of an imported nature and a consequence of rising prices in Europe, and that it was caused to a lesser extent in Montenegro due to increased taxes and excise duties on certain products and services.
He said that his proposal would be to increase state subsidies for domestic producers through the competitiveness support program in the budget for next year from 3,5 million to 30,5 million, and that he would support the proposal to increase the agricultural budget for farmers.
He also stated that excise taxes on unhealthy products such as cigarettes, sweets, wine, carbonated drinks, etc. have been increased, and that it would be logical for him to reduce them on healthy products such as fruits and vegetables.
Đeljošaj stated that the continuation of the limited price campaign is being considered, that at the previous session, the prices of medicines from the Ministry of Health list were limited, that they had agreed with traders and the Chamber of Commerce to highlight domestic products, and that the ministry financially supports the cijena.me portal.
Mugoša said that previously the state budget financed the competitiveness program for domestic producers with six million, but it was reduced to 3,5 million.
"The government and the parliamentary majority rejected my proposal last year to return this item to six months, so I really don't expect you to get support for increasing it to 30 million," Mugoša said.
Đeljošaj emphasized that he believes that if there is no money, it would be necessary to borrow to increase the competitiveness program and the agricultural budget, because this is the money that is returned the fastest.
Radojević also stated that actions such as stopping inflation only partially treat the consequences, adding that the future fiscal council should analyze the causes of inflation through fiscal policy instruments.
"Europe Now Movement" MP Tonći Janović said that the opposition, part of the professional public under quotation marks, and some media outlets want to prove that 222 euros (the former minimum wage) is higher than 600 euros (the current minimum wage), and that they are spreading lies through negative comments about government policy.
He stated that many traders have had a privileged position in recent decades and that they now have a monopoly, which is why they keep their prices high.
He said that the Ministry of Finance is doing a great job, correcting mistakes from the previous period and introducing greater controls.
URA's weakest member Miloš Konatar said that salaries have increased and that he also voted for the measures from Europe Now 1, but that it must be said that inflation has made the growth of those salaries meaningless in the meantime. He stated that Finance Minister Novica Vuković has also influenced inflation with his measures, and that the government's strategy is to bury its head in the sand, expecting inflation to go away on its own.
DPS MP Mihailo Andjušić said he did not believe the government would fight inflation because it makes money from it and that curbing it would mean a budget deficit. He stated that the union consumer basket for a family of four is greater than two average salaries.
He pointed out that the media compared the market barometer from 2019 and now, according to which the price of kajmak increased from nine to 15 euros, old cheese from five to nine euros, figs from one and a half to five euros, tomatoes from 0,6 to two euros, eggs from 15 to 45 cents,... and that the tax for the same property in 2021 was 98 euros and now it is 186 euros.
"Europe Now Movement" MP Dražen Petrić said that according to surveys, the majority of citizens say they live better now than five years ago, and no one can say that inflation is not a problem, but that average salaries have increased by 92 percent.
DPS MP and economics professor Nikola Milović said that the goal of such discussions should be to find ways to prevent the negative effects of inflation.
"When there is a significant increase in wages and labor costs, which is not accompanied by productivity growth, inflation must occur. These are basic economic actions. If you increase VAT and excise duties, the prices of these products must also increase," said Milović, pointing out that the duties that have been introduced must be reduced and the economy must be supported to reduce prices through additional reductions.
Boris Mugoša said that inflation in Montenegro is twice as high as in the eurozone countries, and that the fact that electricity in Montenegro has increased by four percent and in the EU by 40 percent indicates that the prices of other products have increased significantly and that there is a bigger problem.
He stated that the growth of average wages cannot be used as a parameter of the growth of standards and that the median wage should be introduced into statistics. He said that 74 percent of employees receive wages lower than a thousand euros, and that 72 percent of pensioners have a pension lower than the average of 500 euros.
He also said that Sweden, where inflation is 1,1 percent, is reducing VAT on food from 12 to six percent, and that Montenegro still keeps VAT on fruit and vegetables at 21 percent, even though it is ten percent in Croatia and five percent in Serbia.
Vuković pointed to the deficit in state revenues and that he expects the state to have to return part of the PIO contributions in 2026 or 2027.
Mugoša explained that the plan was to invite Finance Minister Novica Vuković to the session due to the conclusions on the need to reduce food taxes, but that the majority decided not to invite him because he attends committee sessions too often.
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