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April 2012

Business Environment Macroeconomic Outlook Capital Market Banking Sector Meanwhile, the macroeconomic situation, the Ministry of the Finance of Montenegro has Privatization and Investments announced that the national budget will be Economic Freedom reviewed. Current budget revenue in January Business News 2011 amounted to €48.7 million, thus showing a decrease of 11.7% in comparison with same In the Spotlight month last year, or a decrease of 18.0% in Coming up...

Macroeconomic Outlook REAL SECTOR Industrial production: recorded a fall of 19.7% during the period January- February 2012 in comparison with the same period last year. The main reason for this decrease in industrial output was that electricity production went down by 39% due to unfavorable hydro meteorological conditions. Tourism: during the period January- February 2012, 28,019 tourists (70.8% foreigners) visited Montenegro, thus recording a fall of 10.2% in comparison with the same period last year. On the other hand, 114,046 bed-nights were achieved, which represented an increase of 2%. Construction: according the latest available data, the total value of completed construction projects totaled 95,569,000 in the fourth quarter; 48.8% above last year’s average. Inflation The annual rate of inflation, as measured by the Consumer Price Index (CPI), was 4.2% during the period January- February 2012. Price increases in certain product areas and in services, particularly alcoholic beverages and tobacco (23.3), health care (8.2%) and transport (7%), were obvious. The price increases were due to the fact that, from 1st January, 2012, excise tax on cigarettes increased from 13 to 15 cents, and fuel prices also went up at the end of March.

comparison with its projected value. Budget expenditure amounted to €63.9 million, thus showing a year-on-year increase of 27.3% in January 2011. In January 2011, the Montenegrin budget recorded a deficit of €15.28 million, or 30% of its projected value for 2012. Public debt in January amounted to €1,473.2 million (43.3% of GDP).

Graphic 3. Budget structure Revenues 1210.07

INTERNATIONAL ECONOMIC RELATIONS Foreign Direct Investments (FDI) According to the latest available data, net FDI inflow amounted to €389 million in 2011, a fall of 29.5% when compared with 2010.

Deficit -42.65

Planned Budget of Montenegro_ 2012 (in million EUR)

Expendit ures 1252.72

Source: MONSTAT, Ministry of Finance of

Total FDI inflow amounted to €494.7 million. Montenegro When looking closely at the FDI inflow structure, it is evident that the largest influx came from investment in local companies and banks along with the sale of real estate (€157.7 million and €184.3, respectively). FDI influx in the form of Graphic 4. Inflation (CPI Index) intercompany debt amounted to €132.6 million, Feb-12, 2.5 while influx due to the withdrawal of residents’ Employment and Wages capital invested abroad amounted to €20.1 2.5 At the end of February, there were 162,035 million. 2.0 employed and 31,495 unemployed (14,800 of 1.5 which were women). The unemployment rate at Total FDI outflow amounted to €105.6 million Mar-11, 0.8 May-11, 0.6 1.0 the end of March was 13.58%. which, in comparison with 2010, was 4.9% Jan-12, 0.8 Average earnings (without taxes and higher. The largest outflow was seen in the Aug-11, 0.3 Oct-11, 0.3 0.5 Apr-11, 0.8 Dec-11, 0.0 contributions) in Montenegro were €495. withdrawal of non-residents’ investments 0.0 Sept-11, 0.2 (€73.2 million), while €32.4 million related to Jun-11, 0.0 Nov-11, 0.2 In comparison with January 2012, average residents’ investments abroad. -0.5 Feb-11, -0.1 July-11, -0.3 earnings without taxes and contributions (net) -1.0 decreased by 2% in February 2012. External Trade Source: MONSTAT Average earnings without taxes and The total amount of foreign exchange realized contributions (net) in February 2012, when during the period January- February 2012 compared with figures in February 2011, fell amounted to €257.45 million. Total exports by 2.2 %. However, they increased by 2.3% amounted to €51.15 million, thus recording in comparison with average monthly earnings a fall of 26.1% in comparison with the same without taxes and contributions (net) in 2011. period last year. Total imports, with a combined Graphic 5. Average salary without Bearing in mind that consumer prices in total value of €206.30 million, recorded a slight taxes and contributions (in €) February 2012 increased by 1%, in comparison increase of 1.5%. The export-import ratio of Feb-12 EUR 495 Jan-12 EUR 505 with January 2011, the overall result has 24.8% remained the same as last year’s average Dec-11 EUR 484 been that real earnings, without taxes and level (24.9%). Nov-11 EUR 483 Oct-11 EUR 477 contributions (net), have decreased by 3% in Montenegro is most import-dependent on EUR 477 comparison with same period of last year. Serbia, Greece, Bosnia & Herzegovina, Croatia Sept-11 Aug-11 EUR 475 and China. The most important export markets July-11 EUR 476 Jun-11 EUR 475 PUBLIC FINANCE for Montenegro are: Croatia, Serbia and Bosnia May-11 EUR 479 & Herzegovina. Apr-11 EUR 473 EUR 484 Budget Mineral fuels, mineral oils and products Mart-11 EUR 506 According to the Law on the Budget of resulting from their distillation (27.6%), Feb-11 450 460 470 480 490 500 510 Montenegro for 2012, revenue is projected to be meat and edible meat offal (4.7%), inorganic €1,210,074,101.60. Expenditure is projected at chemicals (3.6%), and pharmaceutical products Source: MONSTAT, Employment Agency of Montenegro €1,252,724,789.74, thus suggesting a potential (3.4%) are the most imported products. deficit of €42,650,688.14.

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