Montenegro Country Report - July , 2014

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Montenegro Country Report - July , 2014

This report covers the main macroeconomic releases from July 4 until August 5 as well as the financial and political events that took place in Montenegro during this period.
The country’s finance minister forecast that the economy could achieve annual growth rates of over 5% in the medium term, driven mainly by an improvement of the public finances and by an investment cycle launched in the energy, infrastructure, and tourism sectors. The forecast is higher than the official government projection of an average growth of 3.7% in 2014-17.
The finance ministry also announced that the budget deficit narrowed 27.2% y/y to EUR 55.8mn in the first half of 2014 as strong revenue growth offset a softer increase in expenditures. The budget gap declined to 1.6% of the full-year GDP projection from 2.3% a year ago.
The report also contains information about the aluminium firm KAP, which was taken over by the local privately-held firm Uniprom. It also informs about the blocked bank account of publishing house Pobjeda as well as about the government’s takeover of EUR 3.7mn bank debts of state flag carrier Montenegro Airlines. In addition, the energy firm EPCG reported that its electricity output rose 40.3% last year, 21.2% above the plan.

Key points:
• CPI inched down 0.1% y/y in June following a 1.3% y/y decrease in May 2014. Retail sales rose for the fourth straight month, going up by a real 4.8% y/y in June following a 5.4% annual growth in the previous month.
• Industrial output dropped 26.4% y/y in June, deepening from a 23.4% annual contraction the month before.
• The unemployment rate measured by the number of registered unemployed fell to 13.52% in early July from 14.09% a month earlier. It remained below the end-2013 level of 14.8%, but was higher than the end-2012 unemployment rate of 13.46%. In addition, average net monthly wages shrank for the seventh consecutive month in June 2014, falling by 0.6% y/y to EUR 478.
• The number of foreign tourists visiting Montenegro increased by 1.3% y/y in June 2014, slowing down from the 5.5% annual growth the month before but the total arrivals inched down 0.8% y/y due to a 19.1% drop in domestic tourists.


Table of Contents

EXECUTIVE SUMMARY 3
REAL SECTOR 4
1. GDP 4
Montenegrin economy could reach growth rates of over 5% in mid-term - FinMin 4
2. Inflation 4
Montenegro’s CPI deflation softens to 0.1% y/y in June 2014 4
Montenegro reports EU-harmonised inflation of 0.2% y/y in June 2014 5
Montenegro’s producer prices stay flat y/y in June 2014 6
3. Industry and Trade 7
Montenegro’s industrial output decline deepens to 26.4% y/y in June 2014 7
Montenegro’s industrial sales drop 28.3% y/y in June 2014 7
Montenegro’s retail sales increase 4.8% y/y in May 2014 8
Montenegro’s investments in fixed capital increase 11% to EUR 485mn in 2013 8
4. Labour Market 8
Montenegro’s unemployment rate falls to 13.52% in early July – employment agency 8
Montenegro’s net wages drop 0.6% y/y in June 2014 9
5. Tourism 9
Foreign tourist arrivals to Montenegro rise 1.3% y/y in June 2014 9
FISCAL SECTOR 10
Montenegro’s first-half budget gap narrows 27% y/y to EUR 56mn on higher tax revenue 10
Montenegro’s budget deficit reaches 1.7% of GDP in Jan-May 2014 11
Montenegro sells EUR 13.7mn in 182-day T-bills, yields fall 12
FINANCIAL INTERMEDIATION 12
Montenegro’s bank assets rise 3.1% y/y to EUR 3bn at end-June 2014 12
Montenegro’s bank deposits growth slows to 6.8% y/y in June 2014 13
Lending interest rate in Montenegro declines to 10.05% in June 2014 14
EXTERNAL SECTOR 14
Montenegro’s Jan-May net FDI inflow up 6.6% y/y to EUR 124mn 14
Montenegro’s trade gap widens 4.5% y/y to EUR 682mn in H1 2014 15
STRUCTURAL REFORMS AND CORPORATE NEWS 15
Overall 137 workers apply to voluntarily leave Montenegrin aluminium firm KAP 15
Montenegro's Uniprom takes over management of aluminium firm KAP 16
Montenegrin publisher Pobjeda's accounts blocked over unpaid debt to Societe Generale 17
Two bidders stay good chances to acquire Austrian lender Hypo’s Balkan network - report 17
Montenegrin govt takes over EUR 3.7mn bank debt of Montenegro Airlines 18
Montenegrin energy producer EPCG says 2013 output up 40.3% to 3,809 GWh 19
Montenegro extends again deadline in tender for Skadar lake tourism project to Oct 31 19

Number of pages: 19
Release Date: Tue, 05 Aug 2014