The average gross salary in the next three years will increase by four to five percent annually, while inflation will be two to three percent, according to the Macroeconomic Projections 2025-2028, which the Ministry of Finance published with the budget proposal for next year.
This means that the standard of living (wage growth minus inflation) will see minimal growth in the next three years. The projections were made according to the basic growth scenario, while a pessimistic or lower possible growth scenario has not been published.
GDP error of 32 percent
The Ministry of Finance expects gross domestic product to grow by 3,3 percent this year, significantly lower than the 4,8 percent projection in last year's Fiscal Strategy. An error of 32 percent was made in the estimate.
The economy is expected to grow by 3,2 percent next year, 3,1 percent in 2027, and 3,2 percent in 2028.
This growth dynamics, as stated, is based on the growth of private household consumption and planned investments.
"The main driver of growth in the medium term will be domestic demand, with projected real growth of 5,2% in 2025 and around 3% per year on average in the medium term. Private consumption will maintain strong momentum thanks to employment growth, wages and expansion of credit activity," the text of the Macroeconomic Projections states.
Can consumption growth continue if the foreigners leave?
However, the tabulated data indicates that a significant slowdown in consumption is expected. Thus, household consumption (including both domestic and foreign citizens) grew by 5,7 percent this year, while it is expected to decrease to 2,9 percent next year, to 2,3 percent in 2027, and to grow by only two percent in 2028, at the level of inflation in that year.
A significant share in the growth of household consumption in the past year was played by a large number of foreigners with temporary or permanent residence, whose number exceeded 100 thousand until two months ago, i.e. they had a share of about 15 percent of the population and at least that much in general consumption. Consumption on products and services is a significant part of the Montenegrin economy, but even more significant is that after the abolition and reduction of contributions, consumption taxes (VAT, excise duties, ...) make up almost two-thirds of the state budget.
Following incidents between Montenegrin citizens and citizens of Azerbaijan and Turkey in Zabjelo, the Government abolished the visa-free regime with Turkey. A proposal for amendments to the Law on Foreigners, which provides for more rigorous conditions for granting and extending the stay of foreigners, is also in the parliamentary procedure. The macroeconomic projections do not analyze how these measures will affect the reduction in income from the consumption of foreigners.
Lending and government spending are slowing down
"A strong increase in newly approved loans and a continued inflow of remittances from abroad will continue to support domestic consumption. On the other hand, public spending projections, based on current budget spending and capital budget investments, indicate an average annual growth of government spending of 2,2% in the medium term," the document states.
The table shows that the growth in newly approved loans in 2024 was 23,4 percent, and in 2025 it was 20 percent. However, it is expected that there will be a significant slowdown in the approval of new loans in the next three years, so that in 2026 and 2027 the growth in newly approved loans will be five percent each, and in 2028 six percent, which is just slightly above the expected inflation.
The data also indicate that government spending is slowing down, and even the announced large government investments in highways, railways, healthcare, education, etc. have no impact on this growth. Government spending in 2024 grew by three percent, in 2025 by 2,7 percent, in 2026 and 2027 by 2,5 percent each, while in 2028 it will grow by 1,5 percent.
Hope in FDI even though they are decreasing
The Ministry expects that in the next three years there will be an increase in private investments, as well as projects that will be financed from EU funds.
"It is projected that in the period 2026-2028, based on relevant investment plans in the areas of tourism, renewable sources and energy efficiency, there will be an increase in investments and investment activity, resulting in net foreign direct investments amounting to around 6,4% of GDP," the Macroeconomic Projections state.
Data from the Central Bank for the first nine months show that net foreign investments have decreased in nominal terms from last year's 372 million to 366 million. The structure of investments shows that more than half of them are related to the purchase of real estate, and that the outflow of investments, or the withdrawal of invested money, is increasing.
"Investment in fixed assets will represent an important factor of economic growth in the medium term, with projected growth of 6% on average per year and a contribution to GDP of 1,3 percentage points," the document states.
However, official data indicate that investment in fixed assets, which refers to the economy's investments in the acquisition, construction or improvement of fixed assets such as buildings, equipment, machinery and intellectual property, is also slowing down...
Data from the tables in the document itself show that gross fixed capital formation in 2024 grew by 10,2 percent, in 2025 by seven percent, in 2026 by six percent, in 2027 by five percent, and in 2028 by six percent.
We are sure that only imports are growing.
The ministry expects that stable import growth will continue due to increased domestic consumption and investment activity, but they believe that exports will also begin to grow.
"Although a negative contribution of net exports to domestic economic growth is expected in the first years of the projections, this trend is projected to gradually decrease, with a positive impact of net exports of 0,1 percentage points achieved at the end of the medium-term horizon. This trend will be contributed by the growth of tourism revenues and the recovery of goods exports, driven predominantly by higher electricity exports," the Macroeconomic Projections state.
Growth may slow down the departure of young people to the EU
The document also states that the Government is committed to becoming a full member of the European Union by 2028, and that it will temporarily close all negotiation chapters by the end of next year, including those related to labor mobility, which will make it easier for Montenegrin citizens to find jobs in the EU.
"The government is strongly focused on creating conditions for improving the standards of all citizens of Montenegro. On the other hand, even at this level of utilization of economic potential, the country is facing a shortage of labor, especially during the tourist season, which raises concerns that upon joining the EU due to the liberalization of labor mobility, this problem will pose a challenge when it comes to dynamic economic growth, despite all the benefits that EU accession brings," the document states.
The main hope for the budget is VAT and consumption growth
The Ministry of Finance expects that the growth of household consumption through the collection of VAT and excise duties, as well as indirectly through corporate income tax, will contribute most to the stability of state revenues in the coming years.
Revenues from VAT in all the following years, according to these projections, will make up half of the total original revenues of the state. It is calculated on almost all services and products in percentages of seven, 15 or 21 percent of the retail price. The higher the consumption and the higher the prices due to inflation, the higher its collection.
Next year, 1,47 billion is expected from this tax, in 2027 1,52 billion, and in 2028 1,58 billion.
This growth is slightly higher than the inflation rate in that period, and its realization will also depend on whether a large number of foreigners will continue to reside and work in Montenegro.
Bonus video:
