סרביה
אירופה
בוסניה והרצגובינה
צ'כיה
הונג קונג
סין
טורקיהGrowth durably underpinned by tourism
Growth is expected to slow slightly in 2025, but remain underpinned by robust domestic demand and solid tourism. Private consumption, which accounts for 72% of GDP, continues to play a central role, albeit losing momentum under the impact of rising inflation (3.4% in April 2025), driven notably by food and housing. Nevertheless, household purchasing power has been boosted by the “Europe Now 2” initiative, which came into effect in October 2024 and raised the minimum wage from EUR 450 to EUR 700 while reducing social security contributions. Tourism, a key sector accounting for 25% of GDP, has continued to contribute significantly to activity, with foreign visitor arrivals remaining above pre-Covid levels (+12% in 2024 compared with 2019). However, growth is slowing (+1% between 2023 and 2024) and is being held back by infrastructure and capacity restrictions, plus labour shortages, despite a structurally high (10% in March 2025), albeit falling, unemployment rate. Several projects are under way to sustain the tourism trend, including the expansion of the prestigious port of Porto Montenegro and the ongoing development of the Lustica Bay marina complex.
At the same time, public investment remains a key growth driver, particularly in infrastructure and renewable energies, and is the recipient of international financing. For example, the construction of the Mateševo - Andrijevica section (22 km at a cost of EUR 600 million) of the freeway connecting Bar (on the Adriatic coast) and Boljare (on the Serbian border) is benefiting from a EUR 200 million loan granted by the EBRD in March 2025, supplemented by EUR 200 million from the European Commission. The country also continues to attract foreign direct investment, mainly in real estate (60% of total FDI), concentrated in the coastal areas of Kotor, Budva and Tivat, with a strong emphasis on the residential and tourism segments. While industrial sectors remain under-represented and FDI in the banking sector fell by over 13% in 2024, the country's integration into the Single Euro Payments Area (SEPA) in November 2024 will make it even more attractive to European capital. Finally, the easing of monetary policy by the ECB, combined with fiscal stimulus measures, should encourage a gradual recovery in investment by local businesses and households.
Twin deficits will remain under pressure
In 2024, the budget deficit rose sharply under the impetus of a sharp increase in spending to support activity. Maintaining this fiscal stance will accentuate the deficit in 2025, with increases in social transfers, sustained public investment and lower compulsory levies on labour. The upward trajectory of public debt is set to continue, with major (re)financing requirements. Public debt is 90% external and mainly denominated in euros, with 45% in Eurobonds and 17% in a loan from China's Eximbank to finance the construction of the first section of the freeway between Bar and the Serbian border.
On the external front, the current account is set to remain in sharp deficit in 2025. This deficit is fuelled by a sustained rise in imports, under the combined effect of rising wages, which stimulate demand for imported goods, and increased electricity requirements associated with the closure of its Pljevlja coal-fired power plant (40% of electricity production) since April 2025, for a minimum period of seven months. Exports are limited, with an undiversified production base concentrated on a few products (aluminum, timber, ores) and markets (mainly European). The recent 10% tariff increase imposed by the US will have no direct impact on the country, but could have indirect effects with its major trading partners (Serbia, Slovenia, Italy and Germany). The surplus on services, which is driven mainly by tourism, only half offsets the deficit in trade in goods, leaving a large structural current account deficit. On the public side, it is financed by Eurobonds, multilateral loans (EBRD, World Bank, EIB) and bilateral European financing. On the private side, FDI is the main source of financing, while the foreign debt of Montenegrin banks and the non-financial sector (around 57% of total foreign debt) is no longer increasing.
Larger but tense majority
Since October 2023, Montenegro has been governed by a patchy coalition led by the centrist, pro-European party Europe Now! (PES), with Milojko Spaji? as Prime Minister. Following a reshuffle in July 2024, the coalition expanded to include the New Serbian Democracy (NSD), the People's Democratic Party (DPP) and the Bosniak Party (BS), giving it an enlarged majority of 49 seats out of 81 in Parliament, bolstered by parliamentary support agreements with smaller parties. The government thus has a two-thirds majority, but remains vulnerable to internal tensions, due to deep ideological differences between its members, notably between pro-European parties (such as the PES) and pro-Serbian and pro-Russian formations (NSD, DPP). The reshuffle has also made governance more complex, increasing the number of ministers to over 30 and fuelling the risk of deadlock. The current climate makes it likely that the current government will be dissolved before the parliamentary elections scheduled for June 2027. The opposition, dominated by the Democratic Party of Socialists (DPS), has been leading in the polls since mid-2024, but would also have difficulty forming a coherent majority if it came to power.
On the institutional front, the government continues to face criticism about efficiency, as illustrated by the controversial handling of the mass shooting (12 dead) in Cetinje and Bajice in January 2025, which prompted calls for the resignation of senior officials, without success. These criticisms come on top of questions about governance, further highlighted by Parliament's fast-track approval of an agreement with an Emirati investor to develop a wild part of the coast for tourism purposes, which raises concerns about compliance with European standards on public procurement and the environment. Furthermore, the vote on the 2025 budget was only possible in February after delays caused by blockages over the appointment of judges to the Constitutional Court. Despite these obstacles, Prime Minister Spaji? maintains an ambitious pro-EU line, aiming for membership by 2028. Montenegro (along with Albania) remains the most advanced Western Balkan country in the EU integration process, but its rate of progress is conditional on internal political stability. The presence of nationalist and sectarian parties in the coalition raises doubts about the continuation of reforms. This may curb the country's diplomatic headroom. The country continues to align itself with European sanctions against Russia, while maintaining close ties with Serbia and the influential Serbian Orthodox Church, which may thwart its room for manoeuvre in diplomatic and social matters.
