{
  "title": "Montenegro: IMF Executive Board Concludes 2018 Article IV Consultation",
  "publication": "IMF News, May 21, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation",
  "canonical": "https://www.imf.org/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation",
  "overlayPath": "/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation/index.md",
  "summary": "Montenegro’s economy is growing strongly, boosted by large investment projects including the construction of the Bar-Boljare highway.",
  "publishDate": "2018-05-21",
  "sections": [
    {
      "heading": "Economic growth and outlook",
      "content": "- Montenegro’s economy is growing strongly, boosted by large investment projects including the construction of the Bar-Boljare highway.\n- Staff projects:\n  - Real GDP growth of 3 percent in 2018.\n  - Real GDP growth of 2½ percent in 2019.\n- Highway construction is expected to end next year and to moderate growth thereafter; fiscal consolidation is also a moderate drag on growth.\n- The supply-side boost from the highway section and other large investment projects should help sustain growth over the medium term."
    },
    {
      "heading": "Fiscal developments, vulnerabilities, and medium-term plan",
      "content": "- Government debt increased substantially due to publicly financed infrastructure projects, reaching 75 percent of GDP in 2017.\n- Large refinancing needs over 2019-21 are a source of fiscal vulnerability.\n- The authorities are implementing a medium-term fiscal consolidation strategy (announced in 2017); most fiscal measures have been legislated and implemented.\n- Staff projections if the strategy is fully carried out:\n  - Primary fiscal surplus of 4½ percent of GDP by 2020.\n  - Government debt to fall to 53 percent of GDP by 2020.\n- Staff projection on debt dynamics if plan continues:\n  - Primary surplus of 4½ percent of GDP in 2020.\n  - General government debt (including guarantees) peaking at 80 percent of GDP in 2019 and falling quickly thereafter.\n  - Primary surpluses may decline to around 3 percent of GDP after 2020 but maintaining surpluses will be necessary for rapid debt reduction.\n- Policy recommendations:\n  - No fiscal space exists to finance remaining highway phases with debt; completion via PPP should meet standard cost-benefit criteria and avoid large contingent liabilities.\n  - Strengthen fiscal institutions, including fiscal rules and budgetary processes.\n  - Implement fiscal reforms to improve revenue and expenditure composition:\n    - Right-size the public-sector workforce and implement civil service reform.\n    - Strengthen central oversight over local government finances and increase municipalities’ incentives and capacity to raise own revenues.\n    - Tighten eligibility for early retirement; shift pensions to wage valorization and CPI indexation.\n    - Review the fiscal cost of tax exemptions.\n  - Maintain concerted political efforts to preserve fiscal discipline and complete the underlying adjustment."
    },
    {
      "heading": "Banking and financial sector",
      "content": "- Conditions are strengthening: improving asset quality, recovering credit growth, and high liquidity.\n- The sector appears crowded, posing challenges for bank profitability.\n- Authorities’ actions and staff recommendations:\n  - Closed supervisory gaps by bringing non-bank financial institutions under central bank supervision.\n  - Implement supervisory action plans for weak banks and intervene if necessary.\n  - Conduct asset quality reviews to improve loan classification and provisioning practices as soon as possible.\n  - Adopt a definition of non-performing loans that does not exclude impaired assets with adequate collateral.\n  - Be cautious in granting new banking licenses and promote consolidation.\n  - Continue to improve the AML/CFT framework and implement outstanding recommendations of the 2015 FSAP."
    },
    {
      "heading": "Labor market, productivity, and structural reforms",
      "content": "- Structural constraints:\n  - Low labor productivity, low employment levels, and a large informal sector limit potential growth.\n  - Structural labor market impediments discourage labor force participation and formal-sector employment.\n  - Montenegro’s external position is weaker than consistent with medium-term fundamentals.\n- Policy recommendations:\n  - Implement a unified strategy to improve labor market outcomes by:\n    - Reducing the labor tax wedge.\n    - Reforming withdrawal of social benefits.\n    - Adopting amendments to the labor law that balance worker protection with increased labor market flexibility.\n  - Review state involvement in the economy to limit it to areas of market failure.\n  - Strengthen the framework for public-private-partnerships to minimize the risk of large public liabilities."
    },
    {
      "heading": "Executive Board assessment (summary)",
      "content": "- Economic growth should remain strong in 2018 despite fiscal consolidation and maintain momentum over the medium term, slowing moderately as consolidation continues and highway construction ends.\n- Authorities are appropriately focused on fiscal adjustment to lower government debt to safer levels; front-loaded adjustment is appropriately timed.\n- The medium-term fiscal adjustment plan is well specified and socially balanced; continued implementation would restore sustainable government finances.\n- Strengthening fiscal institutions, fiscal rules, and budgetary processes is recommended to support sound fiscal decisions.\n- Further measures are needed to improve financial sector health, labor market flexibility, productivity, and external competitiveness."
    },
    {
      "heading": "Selected economic indicators (2014–2019; as reported)",
      "content": "- Output, prices and labor market (percent change, unless otherwise noted):\n  - Real GDP (percent change): 2014: 1.8; 2015: 3.4; 2016: 2.9; 2017: 4.4; 2018 (Prel./Proj.): 3.0; 2019 (Proj.): 2.4.\n  - Nominal GDP (in millions of euro): 2014: 3,458; 2015: 3,655; 2016: 3,954; 2017: 4,237; 2018 (Proj.): 4,492; 2019 (Proj.): 4,692.\n  - Industrial production: 2014: -11.5; 2015: 8.2; 2016: -2.9; 2017: -4.5; 2018: ...\n  - Tourism (Overnight stays): 2014: -9.2; 2015: 5.3; 2016: 8.4; 2017: 10.5.\n  - Unemployment rate (in percent): 2014: 18.0; 2015: 17.6; 2016: 17.7; 2017: 16.1.\n  - Consumer prices (average): 2014: -0.7; 2015: 1.5; 2016: -0.3; 2017: 2.8.\n  - Consumer prices (end of period): 2014: 1.4; 2015: 1.0; 2016: 1.9; 2017: 2.7.\n  - Average net wage (12-month): 2014: -0.5; 2015: 0.7; 2016: 4.0; 2017: 2.3.\n- General government finances (percent of GDP):\n  - Revenue and grants: 2014: 43.5; 2015: 40.4; 2016: 41.3; 2017: 40.9; 2018 (Proj.): 43.4; 2019 (Proj.): 42.4.\n  - Expenditure: 2014: 44.2; 2015: 46.6; 2016: 47.5; 2017: 47.8; 2018 (Proj.): 46.1; 2019 (Proj.): 44.4.\n  - Overall fiscal balance: 2014: -6.2; 2015: -7.0; 2016: -2.7; 2017: -2.0; 2018: (not shown); 2019: (not shown).\n  - Primary fiscal balance: 2014: 1.6; 2015: -3.8; 2016: -4.0; 2017: 0.1.\n  - General government gross debt: 2014: 63.4; 2015: 68.8; 2016: 66.4; 2017: 67.2; 2018 (Proj.): 72.5; 2019 (Proj.): 70.9.\n  - General gov’t gross debt (authorities’ definition): 2014: 59.9; 2015: 66.1; 2016: 64.4; 2017: 65.3; 2018 (Proj.): 70.7; 2019 (Proj.): 69.2.\n  - General gov’t debt, including loan guarantees: 2014: 71.5; 2015: 76.2; 2016: 73.9; 2017: 74.6; 2018 (Proj.): 80.1; 2019 (Proj.): 78.2.\n- Monetary sector (end-period, percent change):\n  - Bank credit to private sector: 2014: -0.4; 2015: 2.2; 2016: 6.4; 2017: 7.2; 2018 (Proj.): 7.5.\n  - Enterprises credit: 2014: -2.5; 2015: 1.7; 2016: 6.1; 2017: (not separately shown); 2018: (not shown).\n  - Households credit: 2014: 11.1; 2015: 10.4; 2016: (not shown); 2017: (not shown).\n  - Private sector deposits: 2014: 9.0; 2015: 6.0; 2016: 15.1.\n- Balance of payments (percent of GDP, unless otherwise noted):\n  - Current account balance: 2014: -15.2; 2015: -13.2; 2016: -18.1; 2017: -18.9; 2018 (Proj.): -18.8; 2019 (Proj.): -17.6.\n  - Foreign direct investment: 2014: 10.2; 2015: 16.9; 2016: 9.4; 2017: 11.2; 2018 (Proj.): 11.3.\n  - External debt (end of period, stock): 2014: 163.1; 2015: 161.8; 2016: 158.8; 2017: 159.7; 2018 (Proj.): 164.2; 2019 (Proj.): 166.3.\n  - REER (CPI-based; average change, in percent; negative indicates depreciation): 2014: -0.1; 2015: 0.4; 2016: -1.9.\n\nPress Release No. 18/187 — Montenegro: IMF Executive Board Concludes 2018 Article IV Consultation (May 21, 2018)\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Montenegro and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation/index.md)",
    "[Structured JSON version](/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation/index.json)",
    "[Bundle manifest](/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation/bundle-manifest.json)",
    "Published: May 21, 2018",
    "Montenegro’s economy is growing strongly, boosted by large investment projects including the construction of the Bar-Boljare highway.",
    "Staff projects:",
    "Highway construction is expected to end next year and to moderate growth thereafter; fiscal consolidation is also a moderate drag on growth.",
    "The supply-side boost from the highway section and other large investment projects should help sustain growth over the medium term.",
    "Government debt increased substantially due to publicly financed infrastructure projects, reaching 75 percent of GDP in 2017.",
    "Large refinancing needs over 2019-21 are a source of fiscal vulnerability.",
    "The authorities are implementing a medium-term fiscal consolidation strategy (announced in 2017); most fiscal measures have been legislated and implemented.",
    "Staff projections if the strategy is fully carried out:",
    "Staff projection on debt dynamics if plan continues:",
    "Policy recommendations:",
    "Conditions are strengthening: improving asset quality, recovering credit growth, and high liquidity.",
    "The sector appears crowded, posing challenges for bank profitability.",
    "Authorities’ actions and staff recommendations:",
    "Structural constraints:",
    "Policy recommendations:",
    "Economic growth should remain strong in 2018 despite fiscal consolidation and maintain momentum over the medium term, slowing moderately as consolidation continues and highway construction ends.",
    "Authorities are appropriately focused on fiscal adjustment to lower government debt to safer levels; front-loaded adjustment is appropriately timed.",
    "The medium-term fiscal adjustment plan is well specified and socially balanced; continued implementation would restore sustainable government finances.",
    "Strengthening fiscal institutions, fiscal rules, and budgetary processes is recommended to support sound fiscal decisions.",
    "Further measures are needed to improve financial sector health, labor market flexibility, productivity, and external competitiveness.",
    "Output, prices and labor market (percent change, unless otherwise noted):",
    "General government finances (percent of GDP):",
    "Monetary sector (end-period, percent change):",
    "Balance of payments (percent of GDP, unless otherwise noted):",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Montenegro and the IMF](http://www.imf.org/external/country/MNE/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation/index.md",
    "json": "/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation/index.json",
    "bundleManifest": "/en/news/articles/2018/05/21/pr18187-montenegro-imf-executive-board-concludes-2018-article-iv-consultation/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-25T21:49:41.505Z"
}