2015 Index of Economic Freedom

Montenegro

overall score64.7
world rank66
Rule of Law

Property Rights40.0

Freedom From Corruption44.0

Limited Government

Government Spending36.7

Fiscal Freedom92.6

Regulatory Efficiency

Business Freedom77.1

Labor Freedom77.5

Monetary Freedom79.7

Open Markets

Trade Freedom84.8

Investment Freedom65.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 0.6 million
  • GDP (PPP):
    • $7.4 billion
    • 3.4% growth
    • 0.1% 5-year compound annual growth
    • $11,913 per capita
  • Unemployment:
    • 19.7%
  • Inflation (CPI):
    • 2.2%
  • FDI Inflow:
    • $447.4 million
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Montenegro’s economic freedom score is 64.7, making its economy the 66th freest in the 2015 Index. Its score is 1.1 points higher than last year, with gains in half of the 10 economic freedoms, including labor freedom, freedom from corruption, and trade freedom, slightly offset by declines in the management of government spending and business freedom. Montenegro is ranked 31st out of 43 countries in the Europe region, and its overall score is above the world average but below the regional average.

Economic freedom in Montenegro has expanded by 2.2 points during the past five years and has reached its highest level ever in the 2015 Index. Improvements in seven of the 10 economic freedoms include strong gains in investment freedom and the control of government spending that help to offset a double-digit decline in labor freedom.

Fallout from the global financial and eurozone crisis has hurt growth, but economic reforms have proceeded and have become more broad-based. Open-market policies continue to facilitate privatization of state-owned enterprises. The pace of judicial reform has been sluggish, and the perceived level of corruption remains high.

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Background

The Republic of Montenegro declared its independence from Serbia in 2006. Upon gaining independence, it introduced significant privatization and adopted the euro as its currency despite not being a member of the eurozone. Milo Ðukanovic, leader of the Coalition for European Montenegro, an alliance between the Democratic Party of Socialists of Montenegro and two other center-left parties that won the October 2012 parliamentary elections, became prime minister in December 2012. Montenegro was invited to launch a NATO Membership Action Plan in 2009, became a candidate for membership in the European Union in 2010, and joined the World Trade Organization in 2011. Its economy relies heavily on tourism and exports of refined metals, but real estate is gaining importance. Unprofitable state companies burden public finances, and unemployment is high.

Rule of LawView Methodology

Property Rights 40.0 Create a Graph using this measurement

Freedom From Corruption 44.0 Create a Graph using this measurement

Corruption remains pervasive. According to a 2013 European Commission report, graft and misconduct are widespread in such key areas as health care and public procurement, convictions in high-profile cases are low, and oversight of conflicts of interest is relatively weak. Organized crime significantly influences both the public and private sectors. Politicization of the judiciary is a long-standing problem.

Limited GovernmentView Methodology

Montenegro’s individual and corporate income tax rates are a flat 9 percent. Other taxes include a value-added tax and an inheritance tax. Tax revenue equals 24 percent of domestic production, and public expenditures are equal to 45.9 percent of the size of the domestic economy. Public debt is equivalent to about 57 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Starting a business now takes six procedures and slightly less than a week, with no minimum capital required. However, licensing requirements continue to be costly and time-consuming. The labor market continues to evolve, but unemployment and underemployment remain high. Ongoing massive subsidies for a bankrupt, state-supported Communist-era aluminum factory have distorted the economy.

Open MarketsView Methodology

Montenegro’s average tariff rate is 2.6 percent. Foreign and domestic investors are treated equally under the law, but the court system moves slowly. The financial system has gradually become more open and diversified. However, the system, particularly the banking sector, remains plagued by low profitability, and nonperforming loans have increased to about 20 percent of total loans.

Country's Score Over Time

Bar Graph of Montenegro Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Switzerland80.5-1.1
2Estonia76.80.9
3Ireland76.60.4
4Denmark76.30.2
5United Kingdom75.80.9
6Lithuania74.71.7
7Germany73.80.4
8The Netherlands73.7-0.5
9Finland73.40.0
10Luxembourg73.2-1.0
11Georgia730.4
12Sweden72.7-0.4
13Czech Republic72.50.3
14Iceland72-0.4
15Norway71.80.9
16Austria71.2-1.2
17Latvia69.71.0
18Belgium68.8-1.1
19Poland68.61.6
20Cyprus67.90.3
21Spain67.60.4
22Slovakia67.20.8
23Armenia67.1-1.8
24Macedonia67.1-1.5
25Hungary 66.8-0.2
26Bulgaria66.81.1
27Romania66.61.1
28Malta66.50.1
29Albania65.7-1.2
30Portugal65.31.8
31Montenegro64.71.1
32Turkey63.2-1.7
33France62.5-1.0
34Italy61.70.8
35Croatia61.51.1
36Slovenia60.3-2.4
37Serbia 600.6
38Bosnia and Herzegovina590.6
39Moldova57.50.2
40Greece54-1.7
41Russia52.10.2
42Belarus49.8-0.3
43Ukraine46.9-2.4
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