Montenegro Country Report - August, 2015

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Montenegro Country Report - August, 2015

This report covers the key macroeconomic and financial releases as well as the political events from Montenegro for the period of August 6-September 5, 2015.
Albania and Montenegro along with Iceland and Liechtenstein were included in the list of countries from which Russia bans imports of agricultural products.
The European Union has decided to grant Montenegro €45mn for infrastructure projects. On the other hand, the agriculture ministry has estimated that Montenegro will need billions of euros to protect the current quality of water and to implement all directives of the EU.
Bosnia and Montenegro signed a border demarcation agreement. The two countries are the first ex-Yugoslav republics to sign an agreement defining their borders.
Montenegro's police arrested several high-ranking municipal officials in the resort town of Budva, including the mayor, on suspicion of abuse of power and damaging the budget in the range of millions of euros.

Key points:

• The budget deficit increased by 52.3% y/y to €115.5mn in the first seven months of 2015
• The number of foreign tourists visiting Montenegro increased by 33.4% y/y to 417,894 in July
• Industrial output accelerated its growth to 33.6% y/y in July
• Bank assets rose 9.3% y/y to €3.33bn at end-July

Table of Contents

EXECUTIVE SUMMARY 3
REAL SECTOR 4
1. Inflation 4
CPI inflation holds at 1.9% y/y in July 4
PPI inflation slows to 0.3% y/y in July 4
HICP inflation speeds up to 2.2% y/y in July 5
2. Industry and Trade 5
Industrial output growth accelerates to 33.6% y/y in July 5
Industrial sales rise 10% y/y in July 5
Retail sales improve growth to 3.8% y/y in July 6
3. Labour Market 6
Monthly average net wage rises 1.3% y/y in July 6
4. Tourism 7
Foreign tourist arrivals jump 33.4% y/y in July 7
FISCAL SECTOR 7
Montenegro sells out €40mn 182-day T-bills issue at lower yields 8
Montenegro sells out €21.23mn 182-day T-bills issue at unchanged yields 9
FINANCIAL INTERMEDIATION 10
Bank assets speed up growth to 9.3% y/y at end-July 10
Bank deposits boost growth to 13.2% y/y in July 10
Average lending interest rate falls to 8.82% in July 11
Collaterals cover 3.6 times all loans extended by Montenegrin banks – c-bank 11
Montenegro to start converting CHF loans into euro 11
EXTERNAL SECTOR 12
Trade gap widens 4.7% y/y in January-July 12
Net FDI inflow rises 19.1% y/y to €185.4mn in H1 12
Current account gap widens 9.6% y/y to €490.4mn in H1 13
STRUCTURAL REFORMS AND CORPORATE NEWS 13
Montenegro’s Uniprom to pay remaining €14mn for aluminium smelter KAP 13
Russia adds Albania and Montenegro to food import ban 14
EC approves €222mn programme to support projects in Danube region 14
Western Balkans getting €123mn for migration-related activities from EU 14
Montenegro grants red bauxite exploration concession to Polish Onico SA 15
EU to grant €45mn to Montenegro for infrastructure projects 15
Montenegro starts Abu Dhabi-funded programme for agricultural projects financing 16
Montenegro needs billions to meet EU standards on water quality – agriculture minister 16
China’s CRBC delays launch of main works on Smokovac-Matesevo stretch in Montenegro to end-September 16
POLITICS 17
Montenegro police arrest Budva mayor, officials on corruption charges 17
Bosnia, Montenegro sign first ex-Yugoslav border demarcation agreement 17

Number of pages: 17
Release Date: Wed, 09 Sep 2015