Montenegro Country Report - June, 2014

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Montenegro Country Report - June, 2014

• This report covers the main macroeconomic releases from June 4 untill July 4 as well as the financial and political events that took place in Montenegro during this period.
• GDP grew by a real 1.7% in the first quarter of 2014, slower than the government estimates of 2.3% annual hike and slowing from 3.0% annual growth in Q1 2013. The central bank forecast 3.2%-3.8% GDP growth this year, which is more optimistic than the EC, the EBRD and the IMF expectations for 2.9%, 3.0% and 2.8% GDP expansion, respectively, in 2014.
• The CPI declined for the fifth consecutive month in May 2014 going down by 1.3% y/y and following a 1.4% drop in April, dragged down by falling food, furnishing, communication and recreation and culture costs.
• The industrial production declined for a third consecutive month in May, shrinking by 23.4% y/y, despite improving from a 27.9% y/y contraction the month before, as the rising mining and quarrying production failed to offset falling manufacturing and utilities sector output.
• The Q1 2014 current account gap shrank 4.7% y/y to EUR 183.97mn, mainly thanks to narrowing foreign trade deficit and higher services surplus.
• Net FDI inflow to Montenegro increased by 14.4% in annual terms in January-April to EUR 94.5mn, which equalled to 2.7% of the full-year GDP forecast.
• The current account gap shrank 4.7% y/y to EUR 183.97mn in the first quarter of 2014, mainly thanks to narrowing foreign trade deficit and higher services surplus. The reading equalled to 5.4% of the full-year GDP forecast.

Table of Contents

Contents
EXECUTIVE SUMMARY 3
REAL SECTOR 4
1. GDP 4
Montenegro’s GDP growth slows to 1.7% in Q1 2014 4
Downside risks to sustained economic recovery substantial in Serbia, Bosnia, Montenegro - World Bank 4
Montenegro’s GDP per capita improves to 42% of EU average in 2013 - Eurostat 5
2. Inflation 6
Montenegro’s consumer prices decline 1.3% y/y in May 2014 6
Montenegro’s EU-harmonised deflation slightly eases in May 2014 7
Montenegro’s PPI ticks down 0.1% y/y in May 2014 8
3. Industry and Trade 8
Montenegro’s industrial output drops 23.4% y/y in May 2014 8
Montenegro’s industrial sales decrease 16.1% y/y in May 2014 9
Montenegro’s retail sales increase 5.4% y/y in April 2014 9
4. Labour Market 10
Montenegro’s unemployment rate edges down to 14.09% in early June – employment agency 10
Montenegro’s average nominal net wage falls 0.4% y/y in May 2014 10
5. Tourism 10
Foreign tourist arrivals to Montenegro rise 5.5% y/y in May 2014 10
FISCAL SECTOR 11
Montenegro’s public debt increases 12.8% y/y to EUR 1.99bn at end-April 2014 11
FINANCIAL INTERMEDIATION 11
Share of non-performing loans in Montenegro edges down to 16.4% in March 2014 11
Montenegro’s bank assets increase 3.1% y/y to EUR 3bn at end-May 2014 12
Montenegro’s bank deposits growth slows to 7.1% y/y in May 2014 12
Lending interest rate in Montenegro increases to 10.65% in May 2014 13
Moody's says banking systems of Balkan states on threshold of recovery, sees region’s 2014 GDP up 2% 14
Moody's withdraws ratings of Montenegro's Atlas Banka 14
Montenegro’s First Financial Bank changes name to Universal Capital Bank 15
EXTERNAL SECTOR 15
Montenegro’s Jan-April net FDI rise 14.4% y/y to EUR 94.5mn 15
Montenegro’s current account gap narrows 4.7% y/y to EUR 184mn in Q1 2014 17
STRUCTURAL REFORMS AND CORPORATE NEWS 17
Montenegro’s Uniprom signs deal to buys aluminium firm KAP’s assets for EUR 28mn 17
Montenegro joins EU´s financing programme for SMEs 18
Montenegrin energy producer EPCG Q1 net profit slips 4.8% y/y to EUR 13.9mn profit 18
Montenegro offers assets of machine builder Radvent for sale again 19
Montenegro cancels EUR 250mn golf project deal with Boka Group 19
Montenegro says three intl consortiums submit bids for 12 blocks in oil/gas concessions tender 20

Number of pages: 20
Release Date: Fri, 04 Jul 2014