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

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 relies on a narrow tax base with an economy centered on three sectors, 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 considering the grey economy.  The construction of a two-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, marked an important development and opened opportunities for power exports.  The project cost $850 million and began operation in December 2019.  Other notable energy projects include the controversial reconstruction of the coal-fired thermal plant in Pljevlja in partnership with People’s Republic of China (PRC) company Dongfang Electric Corporation that began in April 2022, 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). 

According to the Central Bank of Montenegro (CBCG), foreign direct investment (FDI) in 2022 totaled $1.22 billion.  Although no one source country dominates FDI, significant investments have come from Serbia, Russia, Germany, Switzerland, UAE, Turkey, Italy, and the United States, with other investments coming from Cyprus, the Netherlands and Austria.  Montenegro has one of the highest public debt-to-GDP ratios in the region, but this ratio has been declining over the last two years thanks to strong growth and repayments, dropping from a high of 105 percent in 2020 to about 73 percent in April 2023.  Infrastructure development remains a government priority.  The China Road and Bridge Corporation built the first section of Montenegro’s north-south highway, which became operational in July 2022 and is designed to better connect the more developed south with the relatively underdeveloped north of the country.  The final three sections to connect to Serbia have not entered the tender process.  The Adriatic-Ionian to connect Albania to Croatia via Montenegro is another strategic project with the potential to unlock increased commerce along the Adriatic coast.   

The pandemic hit Montenegro’s economy hard, with the unemployment rate reaching 24 percent by the end of 2021 before returning to 16 percent at the end of 2022.  Gross domestic product (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 GDP growth of 14 percent for the year, one of the highest in Europe.  GDP growth was 6.9 percent in 2022, led by private consumption and a better-than-expected tourism season.  Economic recovery will continue to face challenges, however, including an unpredictable political environment characterized by frequent changes in government since 2020.  The current government lacks a clear political mandate following a vote of no confidence in August 2022 that has left holdover or “caretaker” ministers occupying key postings, slowing or altogether halting critical government investment decisions.  Under the previous government in 2022, 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.  Analysts have attributed Montenegro’s 20 percent increase in consumption and an inflation rate of over 17 percent in 2022 to the reforms, coupled with inflows of Russian and Ukrainian citizens as a result of Russia’s war of aggression against Ukraine.      Montenegro has not yet joined the Open Balkan Initiative, previously known as “Mini-Schengen,” a project championed by Serbia, Albania, and North Macedonia and designed to facilitate trade, services, and movement of people throughout the Western Balkans.  Montenegro continues to grapple with rule of law concerns, including corruption and organized crime. 

As the 29th NATO member and the long-standing EU-accession front-runner, Montenegro plays a pivotal role in a volatile region still struggling to fully embrace Euro-Atlantic values and susceptible to malign foreign influence.  This has been a central theme since the country’s first transition of power in 30 years following the narrow victory of a broad but disparate coalition of civic, moderate, and radical pro-Serb and pro-Russian parties in the August 2020 national elections.  Since then, two successive coalition governments have lost votes of no confidence in the parliament, first in February and then in August of 2022.  Voters elected a political newcomer in the country’s presidential runoff election held on April 2, 2023, ending the 32-year rule of Europe’s longest serving leader.  After a long-standing political impasse, snap parliamentary elections on June 11, 2023 resulted in new parliamentary representation with no one party claiming a majority and necessitating the formation of a new coalition government.  Negotiations to form a new government were underway as of October 2023, with a coalition expected to form a government by late October.  

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