Montenegro - Country Commercial Guide
Investment Climate Statement (ICS)
Last published date: 2022-08-06

The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses.  The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption.  The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

Executive Summary

Montenegro’s economy is centered on three sectors, with the government largely focusing its efforts on developing tourism, energy, and to a lesser extent, agriculture. The tourism sector officially accounts for about 25 percent of GDP, although some analysts believe it accounts for over one-third when taking into account the grey economy. In the energy sector, the most important development project in the transmission system was the construction of a one-way underwater electricity cable to export power to Italy, which included the development of a 433-kilometer-long tunnel approximately 1,200 meters below the Adriatic Sea surface. The project cost 800 million euro and began operation in December 2019. There are several other ongoing energy projects, including the controversial ecological reconstruction of the coal-fired thermal plant in Pljevlja in partnership with China’s Dongfang Electric Corporation, as well as the development of a 55-megawatt wind power plant in Gvozd, a project supported by the European Bank for Reconstruction and Development (EBRD). The Montenegrin government also signed concession agreements for exploratory offshore oil and gas drilling, which began in March 2021, although preliminary results indicate that the drill site is not feasible for exploitation.

According to the Central Bank of Montenegro (CBCG), foreign direct investment (FDI) to Montenegro in 2021 totalled €898.4 million. Although no one source country dominates FDI, significant investments have come from Italy, Hungary, China, Russia, and Serbia, with other investments also coming from the United Arab Emirates, Azerbaijan, Turkey, and the United States. Montenegro has one of the highest public debt-to-GDP ratios in the region, currently at 83 percent. Infrastructure development remains a government priority, including the second section of Montenegro’s first highway, a project designed to better connect the more developed south with the relatively underdeveloped north of the country. The pandemic hit Montenegro’s economy hard, with the unemployment rate reaching 24 percent by the end of 2021. In addition, GDP declined by 15.3 percent in 2020, the biggest drop in Europe. The country enjoyed a strong recovery in 2021, however, with the government announcing a GDP growth rate of 14 percent for the year, one of the highest in Europe. Economic recovery will continue to face challenges, however. Developments in Ukraine and Russia, two of the Montenegro’s main sources of tourists, will threaten economic growth. An internal political crisis, after Parliament in early February 2022 passed a motion of no-confidence in the Government and subsequently removed the Parliament’s Speaker, also threatens economic stability. As of late March 2022, a caretaker Government was running the country’s day-to-day operations and ongoing negotiations to form a new Government were taking place, with the possibility of snap elections if these talks fail.

Montenegro began implementing a wide-ranging economic reform program known as Europe Now, which eliminated all individual health care contributions, almost doubled the minimum wage, increased pensions, and introduced a system of progressive taxation. As a candidate country on its path to joining the European Union (EU), Montenegro has opened all 33 negotiating chapters (and closed three). But the county’s candidacy is dependent on progress against interim benchmarks in rule of law. The European Commission’s 2021 Country Report for Montenegro termed progress in this area as “limited.” Despite regulatory improvements, corruption remains a significant concern. Montenegro joined NATO in June 2017. Montenegro has not joined the Open Balkan Initiative, previously known as “Mini-Schengen,” an initiative championed by Serbia and Albania designed to facilitate trade, services, and movement of people throughout the Western Balkans.

To access the ICS, visit the U.S. Department of State Investment Climate Statement website.