Country Report Montenegro 1st Quarter 2012
Market Research Report

Country Report Montenegro 1st Quarter 2012 Market Research Report

Outlook for 2012-13

The Democratic Party of Socialists (DPS) is set to remain the dominant political force in 2012-13, following victories in the parliamentary election in March 2009 and the local elections in May 2010. The prime minister, Igor Luksic, will rely on the support of his predecessor-the DPS leader, Milo Djukanovic-to consolidate his authority. EU integration will remain the foreign policy priority; given sufficient progress with reforms, accession talks should start in June 2012. Real GDP grew modestly in 2011, at an estimated 1.9%. The Economist Intelligence Unit forecasts growth of 1% in 2012, because of an expected weakening of import demand in the euro zone, which is forecast to go into recession. Real GDP growth is forecast to accelerate to 2.5% in 2013 as the euro zone begins to recover. We forecast that the current-account deficit will contract in 2012-13, but will stay large, equivalent to an annual average of around 17% of GDP.

The political scene

The EU summit on December 9th decided to open accession talks with Montenegro in June 2012, subject to the candidate country making sufficient progress in tackling corruption and organised crime. The EU's decision followed a positive recommendation in the European Commission's latest annual progress report, published in October. Ethnic Serb and ethnic Albanian deputies raised concerns in October about the alleged lack of equality in the use of languages in parliamentary proceedings.

Economic policy

The central government's budget deficit widened sharply in January-September to EUR63.7m (US$89.5m) from EUR1.3m a year earlier, owing to a large increase in expenditure on social transfers. The government's draft budget for 2012 envisages a deficit of 1.25% of GDP. In November talks were held with visiting IMF officials about the possible provision of IMF assistance to Montenegro.

The domestic economy

Industrial output shrank by 5.9% year on year in January-October as production by the power utilities subsector contracted by 25.4%. The number of overnight stays by tourists increased by 10.2% year on year in January-October. The consumer price index (CPI) rose by 3.4% in October, lifting average year-on-year inflation in the first ten months of the year to 3.1%.

Foreign trade and payments

Merchandise export growth picked up to 47% year on year in January-October from 45% in January-September, and import growth slowed to 11% from 11.2%. The current-account deficit shrank to EUR375m in January-September from EUR490m a year earlier.

This report covers the following industry codes:
SIC Code: 59;70
NAICS Code: 44;72

Please Note: Due to the Nature of This Report The Toc is Not Available