2017 Index of Economic Freedom

Montenegro

overall score62.0
world rank83
Rule of Law

Property Rights58.0

Government Integrity43.4

Judicial Effectiveness50.4

Government Size

Government Spending33.1

Tax Burden83.1

Fiscal Health44.3

Regulatory Efficiency

Business Freedom72.0

Labor Freedom67.4

Monetary Freedom82.5

Open Markets

Trade Freedom84.7

Investment Freedom75.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 0.6 million
  • GDP (PPP):
    • $10.0 billion
    • 4.1% growth
    • 2.0% 5-year compound annual growth
    • $16,123 per capita
  • Unemployment:
    • 18.2%
  • Inflation (CPI):
    • 1.6%
  • FDI Inflow:
    • $699.1 million
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Montenegro’s evolution into a modern, dynamic economy has made considerable gains. The trade regime is increasingly open, and the regulatory and legal frameworks governing investment and production have become more efficient, supporting the development of a growing private sector. Other previous reforms, which included further reduction of the already competitive flat tax rates and implementation of labor market reforms, have also contributed to an upsurge in entrepreneurship.

Despite the great strides made overall, Montenegro’s economic freedom is still curtailed by the lack of institutional commitment to the strong protection of property rights or effective measures against corruption. The court system remains vulnerable to political interference and inefficiency.

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Background

Montenegro declared its independence from Serbia in 2006, introduced significant privatization, and adopted the euro despite not being a member of the eurozone. Milo Ðukanovic has served as president or prime minister for nearly all of the past 25 years. Although his Democratic Party of Socialists won the most seats in the October 2016 parliamentary elections, it failed to secure a majority, and his longtime political ally Duško Markovic became prime minister in a coalition government. Ðukanovic may seek the presidency again in 2018. He has steered Montenegro in a pro-Western direction and has accused Russia of financing opposition parties. Montenegro was formally invited to join NATO in May 2016 and would become the first nation to join since 2009.

Rule of LawView Methodology

Property Rights 58.0 Create a Graph using this measurement

Government Integrity 43.4 Create a Graph using this measurement

Judicial Effectiveness 50.4 Create a Graph using this measurement

Foreigners may own real property. Trademark and copyright violations are a significant problem in the outerwear and apparel markets; unlicensed software can easily be found on the general market. Politicization of the judiciary is a long-standing problem. Corruption is pervasive in health care, education, and all levels of government including law enforcement. Impunity, political favoritism, nepotism, and selective prosecutions are common.

Government SizeView Methodology

The personal income and corporate tax rates are a flat 9 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 39.1 percent of total domestic income. Government spending has amounted to 47.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 5.4 percent of GDP. Public debt is equivalent to 66.4 percent of GDP.

Regulatory EfficiencyView Methodology

Procedures for setting up a business have been streamlined, and the number of licensing requirements has been reduced. Previous reforms reduced some of the labor market’s rigidities, but there is room for further improvement. Now that the bankrupt, state-supported, Communist-era aluminum company KAP has been sold, the government hopes to sell other money-losing state-owned assets, but finding buyers for them will be difficult.

Open MarketsView Methodology

Trade is extremely important to Montenegro’s economy; the value of exports and imports taken together equals 104 percent of GDP. The average applied tariff rate is 2.6 percent. There are few formal barriers to foreign investment, and many state-owned enterprises have been privatized. The financial sector, though small and underdeveloped, is becoming more competitive, and the level of foreign banks’ participation and investment is significant.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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