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Quick Facts
- Population:
- GDP (PPP):
- $11.0 billion
- 4.2% growth
- 3.2% 5-year compound annual growth
- $17,736 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
Montenegro’s economic freedom score is 60.5, making its economy the 92nd freest in the 2019 Index. Its overall score has decreased by 3.8 points, with a steep plunge in fiscal health overwhelming modestly higher scores for labor freedom, government integrity, and property rights. Montenegro is ranked 39th among 44 countries in the Europe region, and its overall score is now below the regional and world averages.
The economy is growing, but future prospects are uncertain in the absence of major policy reforms. Privatization of state-owned enterprises has slowed, and institutional commitment to strong protection of property rights or effective measures against corruption remains weak. The government needs to strengthen public-sector finances and rein in the large current-account deficit, but the combined effects of large public infrastructure investments and several expensive new social programs have directly challenged fiscal sustainability. The court system remains vulnerable to political interference and inefficiency.
Background
Montenegro declared its independence from Serbia in 2006, introduced significant privatization, and adopted the euro despite not being a member of the eurozone. It joined NATO in 2017. Milo Ðukanovic won election to the presidency in April 2018; it is the second time he has held the position. Ðukanovic has served as president or prime minister for nearly all of the past 25 years and has generally steered the country in a pro-Western direction. Although his Democratic Party of Socialists won the most seats in 2016 parliamentary elections, it failed to secure a majority, and Ðukanovic’s longtime ally Duško Markovic became prime minister in a coalition government. Tourism has been growing, generating jobs and investment.
Foreigners may own real property. Trademark and copyright violations are a significant problem; unlicensed software is easily found on the general market. The judiciary has long been politicized. Corruption is pervasive in health care and education and at all levels of government including law enforcement. Impunity, political favoritism, nepotism, and selective prosecutions are common. The official anticorruption agency lacks independence.
The personal income and corporate tax rates are a flat 9 percent. Other taxes include value-added and inheritance taxes. The overall tax burden equals 36.1 percent of total domestic income. Over the past three years, government spending has amounted to 47.4 percent of the country’s output (GDP), and budget deficits have averaged 6.5 percent of GDP. Public debt is equivalent to 67.5 percent of GDP.
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. The government continues to privatize and sell money-losing state-owned assets, but finding buyers for them has proven to be difficult.
The combined value of exports and imports is equal to 106.2 percent of GDP. The average applied tariff rate is 6.3 percent. The regulatory and legal frameworks governing investment generally facilitate the development of a growing private sector. The financial sector is small, but the level of foreign banks’ participation and investment is significant. About 74 percent of adult Montenegrins use a formal bank account.