Montenegro’s politics remain turbulent. Since the October 2016 general election, most opposition parties have refused to join parliament sessions, claiming that the election result was not legitimate. The opposition boycott of parliament is undermining Montenegro’s image as a stable country. Numerous attempts by international institutions and diplomats to persuade the boycotting parties to start talks with the ruling Democratic Party of Socialists have failed.
For its part, the government has been repeatedly criticised for the lack of progress in the fight against corruption and organised crime, as well as for the lack of media freedom.
Meanwhile, the police seem focused on chasing the leadership of the main opposition party, the pro-Russian Democratic Front (DF). Its leaders have been put on trial for various crimes from street violence to the failed 2016 coup plot.
The “trial of the century”, aiming to bring those suspected of being behind the plot to justice, started in 2018 and will continue in 2019. Prosecutors say the plot was intended to help the DF to seize power in Montenegro on the night of the October 2016 general election. The prosecution has accused the two Russians, believed to have links to the Russian secret services, of organising the plot.
The plot was seen as Moscow’s attempt to prevent Montenegro’s Nato membership. Russia has been accused of interfering in Montenegro’s politics, aiming to destabilise the country and change its leadership. While the coup plot was foiled, there is a risk of further political unrest as the trial unfolds.
However, Montenegro is still seen as the frontrunner in the race to join the EU, ahead of Serbia, has a high chance of joining the bloc in 2025, provided politics don’t derail the reform process.
As Montenegro works hard to improve state finances and cut debt, economic growth is seen slowing in 2019 to between 2.5% and 3%. However, structural reforms, progress in its EU accession negotiations and large investment projects in the transportation, tourism and energy sectors give Podgorica good mid-term prospects.
Economic growth is seen slowing to 2.5% in 2019 from an estimated 3.7% in 2018, according to the International Monetary Fund (IMF). The institution has the most pessimistic forecast for 2019 among international financial institutions.
According to the European Commission, in 2019 and 2020, Montenegro’s economy will slow its growth to 2.8% and 3.1% respectively, mainly affected by declining investment. Private and public consumption are forecast to remain subdued in 2019 due to the government’s planned fiscal consolidation measures aimed at curbing public employment and wage growth. The most optimistic projection was from the European Bank for Reconstruction and Development (EBRD) which expects the economy to expand by 3% in 2019.
Montenegro’s public debt increased sharply due to the high costs for the construction of the first priority stretch of the key Bar-Boljare motorway. However, the project also brought new jobs and is expected to help the country’s economic growth once it is completed.
The country’s public debt stood at €3.09bn at the end of September, equalling 67.19% of the projected full-year GDP forecast, according to the latest available finance ministry data.
As the government of Prime Minister Dusko Markovic is expected to continue the broad fiscal consolidation, the general government debt is expected to start falling below the 65% of GDP peak expected in 2019 when the focus will remain on improving the tax environment, economic growth and increasing employment.
According to the government’s projections, the budget deficit would be 2.97% of GDP in 2019 and it will be funded mainly by local securities. Montenegro usually issues six-month T-bills on local market.
The government also plans to approach local banks for loans, but would borrow only if they propose good conditions.
Montenegro is improving its local operating conditions and attractiveness to foreign investors thanks to the reforms it is undertaking in its EU membership path.
Montenegro will keep focusing on infrastructure and tourism in 2019. The country has launched a tender for the construction of ski lifts and tracks in the winter resorts of Kolasin 1600 and Zarski, aiming to increase revenue from winter tourism.
In the meantime, state-owned investment fund Qatari Diar apparently has not abandoned plans to build a luxury hotel in Montenegro as announced in the summer of 2017, and still plans to invest €270mn in the project, according to the government.
In 2014, Qatari Diar bought several land plots in the Adriatic town of Tivat where it planned to build a €350mn tourism complex, including five land plots stretching over 2,356 sqm on Przno bay. It paid a total of €192,000 at a public auction staged by Tivat municipality.
The land plot taken back by the state was among those acquired by the investment fund, which paid €1.3mn for it, according to unofficial information from daily Pobjeda quoted by RTCG. The company claims it has documents to prove its ownership.
The five-star hotel project faced hurdles in the past due to unsolved ownership issues.
Outside the tourism sector, there are plans to push ahead with the reconstruction of the Pljevlja power plant, Economy Minister Dragica Sekulic said in December. Power company EPCG has been mulling construction of a new unit at the power plant but it is not clear how this will be funded after a deal with Czech Skoda Praha was cancelled.