Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Since regaining independence in 2006, Montenegro has adopted an investment framework to encourage growth, employment, and exports. Although the continuing transition has not eliminated all structural barriers, the government recognizes the need to remove impediments, ensure business-friendly policies and improve transparency and openness to foreign investors.
Montenegro makes no distinction between domestic and foreign companies. Foreign companies can own 100 percent of a domestic company, while profits and dividends can be repatriated without limitations or restrictions. Exceptions to this policy are the small number of cases dealing with defense-related industries.
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 is a member of the Central European Free Trade Agreement (CEFTA) and participates in the Regional Cooperation Council of South East Europe and the Berlin Process, but 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. The Euro is the official currency in Montenegro, which stabilizes financial flows and results in lower transaction costs. Private ownership is protected by the Constitution and includes equal treatment of foreigners.
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, designed to better connect the more developed south with the relatively underdeveloped north of the country, and a trans-Adriatic corridor from Albania to Croatia.
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.
A new Government was formed on April 28, 2022, after an internal political crisis led to a vote of no-confidence in the previous Government in February 2022. Under the previous government, Montenegro had begun 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.