Press Release No. 25/381

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Montenegro on November 18, 2025.^[1] The authorities have consented to the publication of the Staff Report prepared for this consultation.^[2]

After a severe economic contraction of over 15 percent in 2020, Montenegro’s economy rebounded strongly, with growth averaging around 9 percent annually between 2021 and 2023. This robust performance was largely supported by favorable external factors, including the global recovery in tourism and substantial inflows of affluent migrants. Real GDP growth moderated to 3.2 percent in 2024, reflecting among other factors, a deceleration in international tourism. Meanwhile, inflationary pressures—as observed elsewhere in the region—have been rising, partly driven by increasing wages. Headline inflation, which fell sharply from a peak of 13 percent in 2022 to just 1 percent by September 2024, rose again to 4.9 percent by September 2025, while core inflation (excluding food and energy) reached 3.2 percent. The policy landscape has been influenced by the government’s Europe Now initiatives, which have helped to reduce labor market informality and enhance financial inclusion. However, their effects on revenue collection and future wage dynamics need to be carefully managed.

The sharp post-pandemic decline in public debt from end 2020-24—by approximately 48 percentage points of GDP—was largely driven both by strong growth and inflation. The  general government deficit is currently projected to widen from 2.9 percent of GDP in 2024 to 3.6 percent in 2025. Without new measures to contain expenditures and mobilize additional revenues, the deficit is expected to exceed 4 percent of GDP by 2030 in baseline forecasts, as aging, health, and defense expenditures will rise. Consequently, the public debt-to-GDP ratio is projected to rise gradually to around 65 percent by 2030.

Real GDP growth is currently projected at 3.2 percent in 2025 and is expected to remain at similar levels over the forecast horizon. Average headline inflation is forecast to remain elevated at around 4 percent in 2025, before gradually converging toward 2 percent over the medium term. The current account balance is expected to weaken to some 18 percent of GDP in 2025 but improve partially as temporary factors subside. However, it is unlikely to return to the levels observed during 2021–2023, unless the economy diversifies and rebalances away from consumption.

 

Executive Board Assessment[3]

Executive Directors commended Montenegro’s resilience in navigating a challenging external environment, underpinned by strong fundamentals and sound policy frameworks. However, they noted that the post-pandemic recovery has matured, and Montenegro must now adapt to meet future challenges. As a small, open economy, the country remains exposed to global shocks that affect tourism and relies on external financing to meet substantial public and external funding needs. Directors emphasized that strengthening the fiscal policy framework, alongside structural reforms aimed at diversifying the economy, would better equip Montenegro to address these vulnerabilities. They welcomed Montenegro’s progress toward European Union (EU) membership, noting that the accession process can serve as the ideal anchor for reforms needed to meet the country’s economic aspirations.

Directors underscored the importance of aligning the fiscal strategy with the economy’s cyclical position as well as the requirements of the Fiscal Responsibility Law. They emphasized that this calls for a recalibration of fiscal policy toward targeting a balanced primary budget. Furthermore, Directors noted that long-term spending pressures due to population aging, health, climate, and defense will increase, which call for fiscal structural reforms. These reforms could include improving civil service and healthcare efficiency, better targeting of social benefits, linking retirement age to life expectancy, and enhancing public investment management. In this context, they recommended strengthening the Fiscal Responsibility Law and operationalizing the independent Fiscal Council to guide fiscal policy through this change.

Directors noted that the banking system is in good health given strong capitalization, ample liquidity, and low non-performing loan (NPL) ratios. They welcomed Montenegro’s integration into the Single European Payment Area (SEPA). In light of rapid growth in private-sector lending and rising real estate prices, they encouraged the authorities to continue close monitoring for early signs of stress—particularly in cash loans and the real estate sector—and to maintain robust supervision, including strong anti–money laundering (AML) enforcement. Directors also cautioned that the development bank should remain focused on its historical mandate of expanding credit access to underserved sectors and regions, avoiding new activities that could generate fiscal or financial stability risks. Finally, they emphasized the importance of safeguarding the operational independence of the central bank for continued financial stability. They underscored the importance of need for ensuring it is staffed with individuals with appropriate skills and experience, in accordance with central bank law.

Directors stressed the need for continued structural reforms to strengthen economic resilience and support higher-quality growth. Noting that the country’s external position remains substantially weaker than levels consistent with underlying economic fundamentals and desirable policy settings, they called for a well-coordinated strategy to diversify the economy—both within and beyond tourism—and to develop a business climate conducive for small and large investors alike. Directors also emphasized the importance of firmly re-establishing the link between wage and productivity growth, whilst also aligning the country’s climate policy objectives with those of the EU.

 

Montenegro: Selected Economic Indicators, 2020–30 (Under current policies; percent of GDP, unless otherwise noted)

Projections       2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030   Real economy     Nominal GDP (millions of €) 4,145 4,923 5,944 7,069 7,645 8,280 8,771 9,233 9,700 10,207 10,720     Gross national saving 3.8 16.2 14.7 14.3 8.8 7.6 8.5 8.6 8.6 9.0 9.4     Gross investment 30.1 25.5 27.6 25.4 25.9 25.7 25.5 25.1 24.5 24.5 24.4     Unemployment rate (percent) 17.9 16.6 14.7 13.1 11.4 ... ... ... ... ... ...        (percent change)     Real GDP growth -15.0 13.0 7.7 6.5 3.2 3.2 3.2 3.0 3.0 3.0 3.0     Tourism                              Foreign Arrivals -86.0 342.9 31.1 20.2 0.0 ... ... ... ... ... ...        Foreign Nights -84.0 323.3 25.9 33.0 -5.0 ... ... ... ... ... ...     Consumer price inflation (period average) -0.3 2.4 13.0 8.6 3.3 4.0 2.4 2.2 2.0 2.0 2.0     Consumer price inflation (end of period) -0.9 4.6 17.2 4.3 2.1 4.9 2.2 2.1 2.0 1.9 2.0     GDP deflator -0.3 5.1 12.1 11.7 4.8 5.0 2.6 2.2 2.0 2.2 2.0     Average net wage 1.7 1.5 33.8 11.2 10.6 ... ... ... ... ... ...                               Money and credit (end of period)  (percent change)   Bank credit to private sector   3.4 3.2 8.2 6.9 15.5 19.3 8.8 6.6 8.5 8.0 7.3      Enterprises   4.2 3.8 7.9 5.2 14.5 ... ... ... ... ... ...      Households   2.9 2.7 8.4 8.2 16.3 ... ... ... ... ... ...   Private sector deposits   -2.0 15.7 23.0 8.9 8.0 10.3 5.9 5.3 5.1 5.6 4.7                               General government finances 1/       Revenue and grants 44.0 43.7 38.1 40.7 40.7 40.2 40.6 40.6 40.7 40.7 40.7     Expenditure 54.9 45.1 42.2 40.4 44.1 43.8 44.3 44.5 44.6 44.9 45.0     Overall fiscal balance -10.9 -1.4 -4.0 0.4 -3.4 -3.6 -3.7 -3.8 -3.9 -4.1 -4.3     Cyclically adjusted overall fiscal balance -3.2 1.2 -3.7 -0.5 -4.2 -4.2 -4.1 -4.1 -4.1 -4.2 -4.3     Primary balance -8.2 1.0 -2.5 2.2 -1.5 -1.5 -1.4 -1.5 -1.3 -1.6 -1.8                                 General government gross debt 108.4 86.2 70.3 59.6 60.8 60.8 61.5 61.7 62.3 63.3 64.9     General government gross debt (authorities' definition) 2/ 106.5 84.6 69.0 58.5 59.7 59.9 60.6 60.9 61.5 62.5 64.2     General government debt, including loan guarantees 113.7 90.2 73.4 62.1 63.1 63.0 63.6 63.7 64.2 65.0 66.6     General government net debt, including guarantees 3/ 92.0 79.6 70.6 59.6 56.3 54.8 55.3 56.4 57.5 58.7 60.2     General government net debt, excluding guarantees 3/ 86.7 75.7 67.6 57.0 54.0 52.6 53.2 54.4 55.6 56.9 58.5                               Balance of payments                         Current account balance -26.3 -9.3 -12.9 -11.2 -17.1 -18.1 -17.0 -16.5 -16.0 -15.5 -15.0     Foreign direct investment, net 11.4 11.8 13.2 6.1 6.4 6.9 7.4 7.4 7.4 7.4 7.4                                 External debt (end of period, stock) 223.5 193.5 158.1 128.2 126.6 142.0 149.9 156.8 163.2 168.9 174.6     REER (CPI-based; y-o-y  avg. change, in percent) 4/ -0.5 -0.5 1.7 3.5 -0.4 … … … … … …                               Memorandum:                         GDP per capita (USD) 7,549 9,322 10,046 12,262 13,259 … … … … … …     Nominal GDP Growth (in percent) -15.4 18.8 20.7 18.9 8.1 8.3 5.9 5.3 5.1 5.2 5.0     Real output gap (percent of potential GDP) -13.2 -4.9 -0.9 2.0 1.6 1.3 1.0 0.7 0.4 0.2 0.0     Gross international reserves in millions of USD  2,116 1,977 2,026 1,553 1,748 2,132 2,184 2,125 2,084 2,082 2,129                               Sources: Ministry of Finance; Central Bank of Montenegro; Statistical Office of Montenegro; and IMF staff estimates and projections.     1/ Includes central and local governments.                                         2/ The authorities do not include the arrears of local governments in their definition of general government gross debt.    3/ General government debt, including guarantees, net of central government deposits.   4/ A negative sign indicates depreciation a REER depreciation.

 

 

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Option 1: Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/montenegro page.

[3] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.