Economy of Montenegro

Economy of Montenegro
Central Bank of Montenegro
Currency	Euro (EUR)
Fiscal year	Calendar year
Statistics
GDP	$7.4 billion (PPP, 2013 est.)
GDP rank	149th (PPP, 2013 est.)
GDP growth	0% (Real, 2012 est.)
GDP per capita	$11,200 (2012 est.)
GDP by sector	Agriculture 0.8%, Industry 11.3%, Services 87.9% (2011)
Inflation (CPI)	4.0% (CPI, 2012)
Population below poverty line	6.6% (2010 est.)
Gini coefficient	24.3(2010)
Labour force	251.300 (2011 est.)
Labour force by occupation	agriculture: 6.3%; industry: 20.9; services: 72.8% (2011 est.)
Unemployment	19.1% (2012 est.)
Average gross salary	772 €(Avg. 2011)[1]
Average net salary	518 € (Avg. 2011)[1]
Main industries	steelmaking, aluminum, agricultural processing, consumer goods, tourism
Ease-of-doing-business rank	51st[2]
External
Exports	{{}}$489.2 million (2012 est.)
Export goods	n/av
Main export partners	Serbia 22.7%  Croatia 22.7%  Slovenia 7.8% (2012 est.)[3]
Imports	$2,4 billion (2012 est.)
Import goods	Food,oil products,natural gas,clothes,industrial products.
Main import partners	Serbia 29.3%  Greece 8.7%  China 7.1% (2012 est.)[4]
FDI stock	n/av
Gross external debt	$1.7 billion (2012 est.)
Public finances
Public debt	52.1 of GDP (2012)
Revenues	$1.68 billion (2012 est,)
Expenses	$1.58 billion (2012 est.)
Credit rating	Standard & Poor's:[5] BB+ (Domestic) BB (Foreign) BB+ (T&C Assessment) Outlook: Negative[6] Moody's:[6] Ba3 Outlook: Negative
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars.

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The economy of Montenegro is mostly a service based economy, currently in the process of economic transition. The economy of this small Balkan state is recovering from the impact of the Yugoslav Wars, the decline of industry following the breakup of SFRY, and UN economic sanctions.

History

As a relatively small principality and kingdom, Montenegro made its first steps towards an industrial economy only at the turn of the 20th century. The causes for this relative delay lay in the small population, lack of raw materials, underdeveloped transport network and comparatively low rate of investment. However, this delay in industrialization had its positive effects - Montenegro survived as a specific ecological oasis.

The first factories were built in Montenegro in the first decade of the 20th century, followed by wood mills, an oil refinery, a brewery, and electric power plants. This brief evolution of industrial economy was interrupted by new wars - First Balkan War (1912–1913), followed by World War I and World War II. Between the two world wars, agriculture maintained its dominant position in the national economy, while the sole remaining industrial plants were wood mills, tobacco factories, breweries, and salt works.

SFRY era

The economy made major progress only after World War II, as Montenegro became part of the SFRY. In the period following World War II, Montenegro experienced a period of rapid urbanization and industrialization. An industrial sector based on electricity generation, steel, aluminum, coal mining, forestry and wood processing, textiles and tobacco manufacture was developed, while trade, international shipping, and particularly tourism became increasingly important by the late 1980s.

Post-Yugoslavia

The loss of previously guaranteed markets and suppliers following the breakup of Yugoslavia left the Montenegrin industrial sector reeling as production was suspended and the privatization program, which had begun in 1989, was interrupted. The disintegration of the Yugoslav market, and the imposition of UN sanctions in May 1992 were the causes of the greatest economic and financial crisis in Montenegro since World War II. During 1993, two thirds of the Montenegrin population lived below the poverty line, while frequent interruptions in relief supplies caused the health and environmental protection to drop below the minimum of international standards. The financial losses under the adverse effects of the UN sanctions on the overall economy of Montenegro are estimated to be approximately $6.39 billion. This period was marked by the second highest hyperinflation in the history of humankind (3 million percent in January 1994).

Due to its favourable geographical location (it had access to the Adriatic Sea and a water-link to Albania across Lake Skadar) Montenegro became a hub for smuggling activity. The entire Montenegrin industrial production had stopped, and the republic's main economic activity became the smuggling of user goods - especially those in short supply like petrol and cigarettes, both of which skyrocketed in price. It became a de facto legalized practice and it went on for years.

Divergence from Serbian influence

In 1997, Milo Đukanović took control over the ruling party DPS and began severing ties with Serbia. He blamed policies of Slobodan Milošević for the overall decline of the Montenegrin economy. Resurgent inflation led the Montenegrin government to "dollarize" the economy, adopting the German mark unilaterally, and insisting on taking more control over the country's economic fate. This eventually resulted in creation of Serbia and Montenegro, a loose union in which the Montenegrin government assumed predominant responsibility for its economic policies.

This was followed by implementation of faster and more efficient privatization, passing of reforming legislation, introduction of a VAT. When the German mark was replaced by the euro, the latter became Montenegro's legal tender despite objections from Brussels. The government established a medium-term plan of economic reforms, popularly referred to as "The Agenda".

Despite implementation of reform laws and privatization of most of publicly owned companies, the living standard of Montenegrins did not improve significantly during this period. The government, with Milo Ðukanović still as the Prime minister, blamed the slow progress on Serbia. Some arguments used to support this position were that foreign debt was higher in Serbia by one third, that unemployment was significantly lower in Montenegro. It was also argued that troublesome cooperation of Serbian government with the Hague war crime tribunal, ongoing Kosovo status process and general political turmoil in Serbia were hampering Montenegro's attractiveness to investors and delaying its progress towards full membership in European Union and NATO.

A referendum was held on May 21, 2006 in which the people of Montenegro voted by a slender majority in favour of Montenegrin independence from Serbia.

Post-independence

Following the independence referendum, Montenegro's economy has continued to transform into a more service-based one, with the proclaimed goal of becoming the elite tourist destination, and joining the European Union. Efforts have been made to attract the foreign investors into tourism greenfield investments, as well as in large infrastructure projects, both needed to facilitate the tourism development.

Montenegro has experienced a real estate boom in 2006 and 2007, with wealthy Russians, Britons and others buying property on Montenegrin coast. Montenegro received, as of 2008, more foreign investment per capita than any other nation in Europe. Due to foreign direct investment, the Montenegrin economy has been growing at a very fast pace in recent years. However, Late 2000s recession will inevitably slow down the growth, as the biggest greenfield investments (development of Velika Plaža, Ada Bojana, Buljarica, Jaz Beach, construction of Belgrade–Bar motorway, new power plants) may be postponed. The recession is also hitting hard on Podgorica Aluminium Plant, the biggest single contributor to GDP, and a major exporter.

In the first half of 2012, Montenegro exported goods (mostly metals) worth 182,3 million €, which is 14,6% less than the same period the preceding year. The major export partners were Croatia (47,2 million €), Serbia (36,8), Bosnia and Herzegovina and Hungary (12,7). The import (mostly food, oil and electronic energy) was 864,9 million €, which is 2,6% more than the same period the preceding year. The major import partners were Serbia (249,2 million €), Greece (73), Bosnia and Herzegovina (59,8).^[7]

See also

• History of Montenegro
• Economy of Serbia and Montenegro
• Economy of Europe

References

External links

Wikimedia Commons has media related to Economy of Montenegro.

• Montenegro Economy and Financial News
• The Njegoskij Fund Public Project >> Country Profile on Montenegro
• CIA World Factbook - Montenegro
• A New Playground for the Rich, a slideshow by The New York Times.