IMF Executive Board Concludes 2025 Article IV Consultation with Montenegro
IMF News, November 19, 2025
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- Published: November 19, 2025
Economic performance and outlook
- Growth history and near-term outlook:
- Growth averaged around 9 percent annually between 2021 and 2023.
- Real GDP growth moderated to 3.2 percent in 2024 and the first half of 2025.
- Real GDP growth is currently projected at 3.2 percent in 2025 and is expected to remain at similar levels over the forecast horizon.
- Tourism and external drivers:
- The rebound was largely supported by the global recovery in tourism and substantial inflows of affluent migrants.
- Deceleration in international tourism contributed to the 2024 moderation in growth.
- Projections:
- 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.
- It is unlikely to return to levels observed during 2021–2023 unless the economy diversifies and rebalances away from consumption.
Inflation and labor-market dynamics
- Inflation developments:
- Headline inflation fell from a peak of 13 percent in 2022 to just 1 percent by September 2024, then rose again to 4.9 percent by September 2025.
- Core inflation (excluding food and energy) reached 3.2 percent by September 2025.
- Average headline inflation forecast: around 4 percent in 2025, converging toward 2 percent over the medium term.
- Wages and policy effects:
- Inflationary pressures have been rising, partly driven by increasing wages.
- The government’s Europe Now initiatives have reduced labor market informality and enhanced financial inclusion; their effects on revenue collection and future wage dynamics need careful management.
Fiscal position, public debt, and risks
- Recent fiscal trajectory:
- The sharp post-pandemic decline in public debt from end 2020–24—by approximately 48 percentage points of GDP—was largely driven by strong growth and inflation.
- The general government deficit is projected to widen from 2.9 percent of GDP in 2024 to 3.6 percent in 2025.
- Without measures, the deficit is expected to exceed 4 percent of GDP by 2030 in baseline forecasts.
- The public debt-to-GDP ratio is projected to rise gradually to around 65 percent by 2030.
- Fiscal recommendations:
- Over the short-term, the weakening fiscal position can be reversed with active fiscal management measures.
- Longer-term challenges (aging, health, defense expenditures) call for deeper fiscal structural reforms.
- Suggested reforms include: improving civil service and healthcare efficiency; better targeting of social benefits; linking retirement age to life expectancy; enhancing public investment management.
- Directors recommended strengthening the Fiscal Responsibility Law and operationalizing the independent Fiscal Council to guide fiscal policy.
- Selected fiscal figures (percent of GDP, unless otherwise noted):
- General government gross debt: 2020: 108.4; 2024: 59.6; 2025: 60.8; 2030: 64.9.
- General government gross debt (authorities' definition): 2020: 106.5; 2024: 58.5; 2025: 59.7; 2030: 64.2.
- General government debt, including loan guarantees: 2020: 113.7; 2024: 62.1; 2025: 63.1; 2030: 66.6.
- Overall fiscal balance: 2020: -10.9; 2023: 0.4; 2024: -3.4; 2025: -3.6; 2030: -4.3.
- Primary balance: 2020: -8.2; 2023: -1.5; 2024: -1.3; 2025: -1.6.
External sector and rebalancing needs
- External vulnerabilities:
- The external position is weakening, partly driven by temporary factors.
- Montenegro remains exposed to global shocks that affect tourism and relies on external financing to meet substantial public and external funding needs.
- External metrics:
- Current account balance (percent of GDP): 2020: -26.3; 2024: -17.1; 2025: -18.1; 2030: -15.5.
- Foreign direct investment, net: 2020: 11.8; 2024: 7.4.
- External debt (end of period, stock): 2020: 223.5; 2024: 126.6; 2025: 142.0; 2030: 174.6.
- Policy direction:
- The economy needs to rebalance away from consumption through diversification to attract higher FDI to a broader range of sectors, reduce external imbalances, and increase resilience.
Financial sector health and safeguards
- Banking sector condition:
- Banking system is in good health with strong capitalization, ample liquidity, and low non-performing loan (NPL) ratios.
- Montenegro’s integration into the Single European Payment Area (SEPA) was welcomed.
- Risks and supervisory guidance:
- Rapid growth in private-sector lending and rising real estate prices warrant continued close monitoring for early signs of stress—especially in cash loans and the real estate sector.
- Maintain robust supervision, including strong anti–money laundering (AML) enforcement.
- The development bank should focus on its historical mandate and avoid activities that could generate fiscal or financial stability risks.
- Safeguarding the operational independence of the central bank is essential; ensure it is staffed with individuals with appropriate skills and experience, in accordance with central bank law.
Executive Board assessment and policy priorities
- Overall assessment:
- Executive Directors commended Montenegro’s resilience and strong fundamentals but noted the post-pandemic recovery has matured.
- Montenegro must adapt to meet future challenges as a small, open economy vulnerable to tourism shocks and dependent on external financing.
- Policy priorities highlighted by Directors:
- Strengthen the fiscal policy framework and align fiscal strategy with the cyclical position and the requirements of the Fiscal Responsibility Law.
- Recalibrate fiscal policy toward targeting a balanced primary budget.
- Implement structural reforms to diversify the economy within and beyond tourism and to develop a business climate conducive for small and large investors.
- Re-establish the link between wage and productivity growth.
- Align climate policy objectives with those of the EU.
- Operationalize the independent Fiscal Council and strengthen fiscal rules to guide adjustment.
Selected economic indicators (high-level picks from table)
- Nominal GDP (millions of €): 2020: 4,145; 2024: 7,645; 2025: 8,280; 2030: 10,720.
- Real GDP growth (percent change): 2020: -15.0; 2021: 13.0; 2022: 7.7; 2023: 6.5; 2024: 3.2.
- Consumer price inflation (period average): 2020: -0.3; 2021: 2.4; 2022: 3.3; 2023: 4.0; 2024: 2.2; 2025: 2.0.
- Consumer price inflation (end of period): 2020: -0.9; 2022: 17.2; 2024: 2.1; 2025: 4.9.
- Tourism—Foreign Arrivals (percent change): 2020: -86.0; 2021: 342.9; 2022: 31.1; 2023: 20.2; 2024: 0.0.
- Bank credit to private sector (end of period): 2020: 3.4; 2021: 8.2; 2022: 6.9; 2023: 15.5; 2024: 19.3; 2025: 6.6.
- Gross international reserves in millions of USD: 2020: 2,116; 2024: 1,748; 2025: 2,132; 2030: 2,129.
- GDP per capita (USD): 2020: 7,549; 2024: 13,259.
Source: IMF; Executive Board conclusion of the 2025 Article IV Consultation with Montenegro (Press Release No. 25/381, November 19, 2025).