Montenegro Country Report - June, 2015

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Montenegro Country Report - June, 2015

This report covers the key macroeconomic and financial releases as well as the political events from Montenegro for the period of June 6 - July 5, 2015.
The World Bank said in its June edition of Global Economic Prospects that Montenegro’s GDP is expected to grow by 3.4% in 2015, quickening from an estimated 1.5% rise in 2014. The forecast remained unchanged from January’s edition of the report. The country’s economic growth is forecast to cool to 2.9% in both 2016 and 2017.
At the same time, Montenegro’s government is targeting an average real economic growth of 3.6% per year in 2015-2018, backed by strong investment cycle, mainly by the construction of the first priority section of the Bar-Boljare motorway from Smokovac to Matesevo.
The European Union (EU) opened on Monday, June 22, two new chapters in Montenegro’s negotiations – on financial services (chapter 9) and on trans-European networks (chapter 21).
The foreign ministers of Montenegro, Croatia, Bosnia and Albania have signed a joint statement to fully support the construction of the Ionian-Adriatic Gas Pipeline (IAP).

Key points:

• The budget deficit increased by 32.7% y/y to €96.8mn in January-May
• The number of foreign tourists visiting Montenegro increased by 6.4% y/y in May
• Industrial output remained unchanged y/y in May
• Unemployment rate declined to 18.1% in the first quarter of 2015 - labour force survey
• Bank assets rose 8.2% y/y to €3.22bn at end-May

Table of Contents

EXECUTIVE SUMMARY 3
REAL SECTOR 4
1. GDP 4
World Bank keeps Montenegro’s 2015 GDP growth forecast at 3.4% 4
Montenegro targets 3.6% average GDP growth in 2015-2018 4
GDP growth speeds up to 3.2% y/y in Q1 5
2. Inflation 6
CPI inflation accelerates to 2.3% y/y in May 6
HICP inflation speeds up to 1.6% y/y in May 7
PPI inflation speeds up to 0.5% y/y in May 7
3. Industry and Trade 8
Industrial output flattens y/y in May 8
Industrial sales shrink 14.8% y/y in May 9
4. Labour Market 9
Monthly average net wage up 0.4% y/y in May 9
Unemployment rate falls to 18.1% in Q1 - Labour Force Survey 10
5. Tourism 10
Foreign tourist arrivals rise 6.4% y/y in May 10
FISCAL SECTOR 10
Jan-May budget gap widens 32.7% y/y to €96.8mn on rising spending 10
Montenegro revises 2015 budget deficit up to 7.2% of GDP 12
FINANCIAL INTERMEDIATION 12
Bank deposits growth speeds up to 12.4% y/y in May 12
Bank assets growth accelerates to 8.2% y/y at end-May 13
NPL ratio up to 16.3% in April – c-bank 14
Mandatory reserves of Montenegrin banks rise 0.4% m/m to €217mn at end-April 14
Average lending interest rate in Montenegro falls to 9.14% in May 14
EXTERNAL SECTOR 14
Trade gap widens 2.8% y/y in Jan-May on falling exports 14
Net FDI inflow jump 30.6% y/y to €111.8mn in January-April 15
Current account gap widens 6.7% y/y to €197mn in Q1 15
Remittances inflow to Montenegro up 5% y/y to €87mn in Q1 16
Public debt to rise to 67.97% of GDP in 2018 16
STRUCTURAL REFORMS AND CORPORATE NEWS 17
French-Austrian consortium Akuo-Ivicom to start building 50MW wind farm in Montenegro 17
EBRD to buy 20% stake in Montenegrin retailer Voli 17
Foreign ministers of Montenegro, Croatia, Bosnia, Albania sign joint statement to support TAP-linked gas pipeline 18
Slovenia's Hit reportedly to sell Montenegrin casino-hotel complex Maestral to Greek businessman Stathis 18
Adriatic Marinas of Peter Munk to build €15mn casino in Porto Montenegro 19
Montenegro, Italy’s A2A reportedly extend temporary agreement on EPCG management 19
POLITICS 20
EU, Montenegro open chapters on financial services, trans-European networks in accession talks 20

Number of pages: 20
Release Date: Sun, 05 Jul 2015