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COUNTRY FEATURE
Montenegro
South-east Europe’s economic standout Montenegro became officially independent in June 2006, becoming the 192nd member of the United Nations. Formerly a member of the Socialist Federal Republic of Yugoslavia, and then of the Union of Serbia and Montenegro, Montenegro had effectively been running its own affairs for some years before independence, notably adopting the euro as its currency in January 2002. Over the last decade, high levels of foreign direct investment (FDI) have made the country the economic standout of South-east Europe. Gross national income has tripled since 2003 and the country now has the highest per capita income in the region. Poverty has declined from 11.3% in 2005 to 9.3% in 2011 (the last year for which data was available), and the country maintains a relatively moderate inequality of income. Following a credit consumption boom and real estate bubble that began in 2006, the economy hit a wall in 2009, contracting by 5.7%. After recovering some growth in 20102011, it slipped into recession again in 2012. The crisis in the eurozone is partly to blame for the slowdown but, as the World Bank notes in its May 2013 report, Montenegro: Preparing for Prosperity – Ensuring Sustainability, Connectivity, and Flexibility for Dynamic Growth, recent successes are being offset by negative trends in the country: “Until now, Montenegro has followed an economic growth model emphasizing capital inputs, Foreign Direct Investment and a steady supply of inexpensive capital. Productivity growth in Montenegro, on the other hand, has been virtually non-existent.” While praising the government’s reform
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At a glance Head of state: Filip Vujanović of the Democratic Party of Socialists of Montenegro (DPS). Population: 632,000 (2011) Urban population (% of total population): 61 Population under the age of 14 (% of total population): 15 Internet users (% of total population): 40 (2011) Electricity production from hydroelectric plants (% of total): 76 (2009 est.) Ranking in the World Economic Forum’s Global Competitiveness Index 2012-2013: 72 out of 144 countries GDP – composition by sector (2011 est.): agriculture: 0.8%, industry: 11.3%, services: 87.9% Main industries: steelmaking, aluminum, agricultural processing, consumer goods, tourism Overnight tourism stays in seaside resorts (% of total overnight stays): 97
efforts, the World Bank is urging further improvements to the business climate for investments and growth. In particular, the Bank is encouraging Montenegro to capitalize on its connectivity – via trade, infrastructure and human capital – to ensure the kind of macroeconomic stability and sustainability necessary for long-term growth. Zeljko Bogetic, World Bank Lead Economist and lead author of the report, said, “Montenegro is an exciting place to do business. It has a great location and is wellpositioned in Europe to take advantage of both regional and global markets. Unfortunately, the country is not making the best of these advantages.” Structural issues holding the country back include the high level of the government’s indebtedness, which has been increased by the burden of its support for the country’s crucial metals industry, particularly the partly state-owned, Kombinat Aluminijuma Podgorica (KAP) aluminium plant and the Zeljezara Niksic steel mill. In May 2013, the International Monetary Fund recommended the closure of the KAP, in order to stem a sharp rise in its public debt. The KAP factory produced 120,000 metric tons of aluminium in 2012, accounting for 4.7% of the country’s economic output, but its total debt of around €350m is equivalent to one tenth of GDP, and it soaks up a further €3m of state subsidies every month. The plant which is situated on the outskirts of Podgorica, the capital of Montenegro, employs 1,200 people, making it the country’s biggest single industrial employer and Montenegrin politicians fear that shutting it down would provoke social unrest.