Fiscal vulnerabilities remain present in Montenegro, due to high debt refinancing needs and measures that have weakened the state's revenue base and increased social spending, according to the latest Montenegro Progress Report published by the European Commission.
The document notes that the country has made some progress in developing a functioning market economy, but that serious challenges remain in maintaining fiscal stability and strengthening the competitiveness of the economy.
"Economic growth slowed during 2024 and the first half of 2025, primarily due to weaker tourism exports, while the budget deficit increased, although it remained in line with the revised target. The labor market situation continued to improve, but structural problems continue to burden the economy, in particular high youth unemployment and long-term unemployment. The banking sector, however, remained stable, well-capitalized and liquid, while some progress was recorded in improving the business environment and preparing the reform of state-owned enterprises," the report states.
The EC warns that Montenegro must more decisively limit public spending and increase budget revenues while respecting fiscal rules, implement the Law on Budget and Fiscal Responsibility, and establish a Fiscal Council in time for the consideration of the 2026 budget. It also recommends preparing a comprehensive statement on fiscal risks, in particular those related to state-owned enterprises, and continuing the reform of their governance.
The report's section on Montenegro's ability to cope with competitive pressures and market forces within the European Union states that the country has achieved a moderate to good level of preparedness, but that progress needs to be faster and more comprehensive. The education system still faces numerous challenges, while the green and digital transitions are progressing slowly. The European Commission highlights the need to diversify the narrow production base and reduce dependence on the services sector, especially tourism, as the limited structure of domestic companies and their low share in exports are holding back the growth of productivity and competitiveness of the economy.
Prepare a "budget for citizens"
The public finance management system in Montenegro, according to the European Commission, is largely in place, but requires further improvements. In March 2025, the government adopted a new public finance reform program and an annual monitoring report for 2024. The Fiscal Council, which is legally required, has not yet been formed, as the Parliament has yet to appoint its members. In December 2024, the Medium-Term Debt Management Strategy and the Fiscal Strategy for the period 2025–2027 were adopted, but the late adoption of the 2025 budget caused limitations in its execution, especially in terms of launching new capital projects and disbursement of earmarked funds. The Ministry of Finance, despite its announcements, has not yet prepared the so-called "budget for citizens", which would explain the priorities and flows of government spending to the public in a simple way.
A positive step forward is the establishment of the Public Investment Council, which has contributed to more efficient planning of infrastructure projects and better implementation of capital investments. However, mechanisms for assessing large investments are still not fully developed, and most public infrastructure management reforms are still awaiting implementation. In December 2024, the Law on Budget Inspection was adopted, after which the Ministry of Finance established a new inspection function, which is already operational and has conducted nine inspections. In January 2025, the annual control plan for the current year was adopted, but some positions of budget inspectors are still not filled.
Political deadlock hampers the Central Bank
The European Commission's report warns of political deadlocks that have negatively affected respect for the principle of independence of the Central Bank of Montenegro. Such problems, it says, directly threaten Montenegro's fulfillment of its obligations under negotiating chapter 17, which relates to economic and monetary policy.
The appointments of two Vice Governors of the Central Bank have been pending since September 2024, while the Parliament rejected the proposed candidates submitted by the Governor in May 2025, without any public explanation. Of further concern is the fact that the appointments of four members of the Central Bank Council have been significantly delayed, creating institutional instability and hampering the functioning of monetary authorities.
The European Commission stresses that Montenegro must urgently ensure a transparent and professional selection process for the members of the Governing Board and the Vice Governor, fully based on the professional qualifications of the candidates, and in accordance with the Law on the Central Bank. This would, it says, restore confidence in the independence and stability of an institution that plays a key role in preserving the country's macroeconomic stability.
Interstate agreements that are in line with the EU
The Commission concludes that last year's recommendations have been partially implemented, and that Montenegro should continue to develop digital public services and establish an interactive e-government platform in the coming period, improve dual education and vocational training programs in cooperation with the economy, and strengthen the regulatory framework for the green transition by adopting a national energy and climate plan and implementing the law on energy efficiency.
Montenegro, according to the latest EC report, has a good level of preparation in the area of public procurement, and significant progress has been made in the past period. The chapter relating to this area was provisionally closed in June, which represents one of the more notable achievements in the EU accession process.
The European Commission assesses that the recommendations from the previous year have been largely implemented, but that the country must continue to strengthen the institutional and legislative framework. The Commission recommends amendments to the Law on Public Procurement and the Law on the Prevention of Corruption, which would expand the definitions of corruption and fraud in public procurement and introduce direct liability for misdemeanors and more efficient budget inspection. It also calls for the introduction of a "red flag" system in the electronic public procurement system in order to detect irregularities and corrupt practices in a timely manner. One of the key requirements is that intergovernmental agreements, such as those with the United Arab Emirates, must not be in conflict with the acquis communautaire.
Strengthen Monstat, appoint president of the Senate of the DRI
In the area of statistics, Montenegro is moderately prepared. The European Commission notes that some progress has been made, in particular in the implementation of the agricultural census and the publication of population and housing census data. However, it highlights that the recommendations of the previous report have only been partially implemented. The Commission calls on the authorities to start regularly producing, publishing and transmitting public finance statistics and data for the excessive deficit procedure to Eurostat, to strengthen the human and financial resources of the Statistical Office (MONSTAT) in order to retain professional staff and increase data production, and to expand the scope of statistics in line with the EU acquis.
Significant progress has been made in the area of public financial control and external audit, where Montenegro is at a good level of preparedness. During the year, a new Law on Internal Control and Governance was adopted, bylaws on internal audit methodology were developed, internal audits in state-owned enterprises were strengthened, and a national anti-fraud strategy was adopted, aligned with European Union recommendations. In October 2025, legislation was also adopted that is fully aligned with European regulations on the protection of financial interests.
However, the productivity and efficiency of internal audit still need to be improved. The roles of budget inspection and internal audit need to be better delineated to ensure the efficient functioning of the public financial control system. The European Commission also recommends strengthening managerial accountability in public administration through the implementation of the new law on internal control and enabling managers to delegate decision-making to lower levels, thereby increasing efficiency.
The report also emphasizes the need to ensure the efficient functioning of external audit by appointing the President of the State Audit Institution, as well as to further improve the fight against fraud to protect the financial interests of the European Union, by implementing legislation aligned with EU Directive 2017/1371, known as the PIF Directive.
Employment Service to access the EURES network
According to the European Commission, Montenegro has achieved a certain level of preparedness in the area of freedom of movement of workers, one of the key policies of the EU internal market. Progress was achieved during the reporting period, primarily through the conclusion of new bilateral agreements on social security with partner countries.
However, the recommendations from the previous report have only been partially implemented, and the Commission stresses that Montenegro needs to further strengthen the administrative structures responsible for implementing European legislation and to complete the alignment of regulations with the EU acquis. In particular, it highlights the need to continue strengthening the administrative and technical capacities of the Employment Service in order to make active employment policies more effective and evidence-based, as well as to prepare for joining the EURES network, which connects national employment services in the EU. The Commission also expects Montenegro to prepare a study on the impact of the European Health Insurance Card on public finances by the end of 2025, which would be an important step towards full integration into the European Union social security system.
In the area of the right of establishment and the freedom to provide services, Montenegro has achieved a good level of preparation and has made very good progress. During the year, amendments to the legislation were adopted to align with the Services Directive, as well as a number of sectoral laws in line with the Professional Qualifications Directive, in particular as regards minimum training requirements in the European Union. The government also adopted a new list of regulated professions, which was forwarded to the European Commission, while the training programmes for five professions enjoying automatic recognition are already aligned with European standards.
Work on legislative harmonisation continues, particularly with regard to the remaining provisions of the Professional Qualifications Directive and the proportionality test, which aims to ensure that any new regulation of professions is proportionate and justified by the public interest.
Significant progress was also recorded in the area of company law, where Montenegro, according to the Commission, has reached a level between good and high levels of preparedness. During the reporting period, amendments to the Capital Markets Law were adopted in order to align it with the EU directives on transparency and harmonisation, including the sanctions regime. In July, the new Companies Law and the Law on Business Organisations entered into force, while accompanying amendments were adopted in October. In September, the Corporate Governance Code was revised, thus fulfilling almost all of the European Commission's recommendations from the previous year.
These reforms align Montenegro with the EU acquis in the area of corporate governance, including the European Directive on Gender Equality on Boards, which encourages a more balanced representation of women in management positions in listed companies. However, the Commission recommends that the country continue to digitalise the business environment, complete legislative amendments enabling fully online company formation and registration, develop software to connect to the European Business Registers System (BRIS), and start preparations for alignment with the new Directive 25/2025, which will further modernise and digitalise corporate procedures in the EU.
Accelerate the implementation of energy efficiency measures
In the area of social policy and employment, Montenegro is, according to the Commission's assessment, between the initial and moderate levels of preparedness. Visible progress has been made, in particular in the harmonisation of the legal framework covering the Labour Law, the Anti-Discrimination Law and the Occupational Safety and Health Law. Progress has also been made in the adoption of strategies for the reform of the social protection system, as well as in the reform of the Employment Service. The European Commission recommends that the capacity of the Service be strengthened in the coming period to become a modern public employment service and that reforms that enable the efficient implementation of active labour market measures, including the Youth Guarantee, be intensified. The Commission also stresses the need to fully align legislation in the area of gender equality and protection against discrimination, and to strengthen social dialogue as a key element of a modern labour market.
In the area of customs policy, Montenegro has made good progress and is assessed as moderately prepared. During the year, the national implementation of the New Computerized Transit System (NCTS) was successfully carried out and preparations for accession to the Convention on Common Transit were completed. However, the European Commission points to concerns about the limited human and financial capacities of the IT sector in the Customs Administration, as well as the slower progress in the implementation of key information systems. The country is recommended to implement the IT strategy for the period 2025–2026, hire additional staff, adopt the Law on Drug Precursors and Psychoactive Substances, as well as the new Law on Free Zones. The Commission also insists on strengthening the fight against customs fraud, in particular smuggling of tobacco products, and expanding cooperation with the European Anti-Fraud Office (OLAF).
In terms of transport policy, Montenegro is between a moderate and good level of preparedness. Progress has been made through the adoption of a new Law on Railways and the improvement of the maritime transport monitoring system, but the Commission's recommendations are reported to have been only partially implemented. In the coming period, the country should adopt a new law on railway safety and interoperability, ensure the operational independence of the regulatory body and the national railway safety agency, and align with key provisions of the Single European Sky Regulation, in particular regarding the ownership and control of air navigation service providers.
In the energy sector, Montenegro has reached a good level of preparedness and made some progress. The Law on Energy and the Law on Security of Petroleum Supply have been adopted, and more ambitious targets in the field of energy efficiency have been defined. The European Commission recommends that Montenegro adopt and implement a National Energy and Climate Plan (NECP) in the coming period in line with the objectives of the Energy Community, fully align its legislation with the Electricity Integration Package and implement the measures foreseen in the Law on Security of Petroleum Supply. It particularly emphasizes the need to accelerate the implementation of energy efficiency measures in line with the European Union's policy on the energy renewal wave.
In the area of trans-European networks, Montenegro is, according to the Commission, between a moderate and good level of preparedness, although progress has been limited. Additional staff were recruited in the Ministry of Transport during the year, but the transport development strategy has not yet been revised, and many infrastructure projects continue to suffer from weak management and insufficient administrative capacity. The European Commission recommends that Montenegro revise its transport development strategy and align it with the Strategy for Sustainable and Smart Mobility in the Western Balkans, strengthen institutional capacity for decision-making and absorption of European funds, and align its legislation with the regulations on trans-European networks in the areas of transport (TEN-T) and energy (TEN-E).
Focus on the implementation of IPARD III
The European Commission in its latest report assesses that Montenegro is moderately prepared in the field of agriculture and rural development, with good progress recorded in the previous period. The implementation of the IPARD II program has been completed with almost 90 percent of the available funds being used, which represents one of the better results within the framework of the EU pre-accession funds. The government, as stated, adopted a comprehensive implementation plan for the establishment of the Paying Agency and the Integrated Administration and Control System (IACS), and at the same time, regulations defining the operational obligations and requirements of this institution were adopted. Laws on wine and olive oil were also adopted, which further improves compliance with European legislation in the field of agriculture.
The European Commission recommends that Montenegro intensify the implementation of the IPARD III programme in the coming period and ensure greater institutional and human resources, in particular through the recruitment of professional staff in the new agencies. The country should also accelerate the implementation of the action plan for alignment with the EU acquis in the field of agriculture and rural development, ensure the continuous adoption of new laws and the completion of the vineyard register. It is particularly emphasized that the activities and measures envisaged in the plan for the establishment of the Paying Agency and IACS be implemented within defined deadlines, with a focus on updating the Land Parcel Identification System (LPIS) and developing plans for the establishment of the Area Monitoring System.
Bonus video:
