Montenegro Country Report - June, 2016

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Montenegro Country Report - June, 2016

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, 2016.
The World Bank said in the June edition of its Global Economic Prospects report that Montenegro’s GDP is expected to grow by 3.7% in 2016, accelerating from an estimated 3.4% rise in 2015.
414 former employees of Montenegro’s aluminium smelter KAP have filed a claim against Prime Minister Milo Djukanovic, Economy Minister Vladimir Kavaric and former Finance Minister Radoje Zugic over unpaid severance. Meanwhile, the London Court of International Arbitration (LCIA) has dismissed arbitration on the claim filed by Russia’s VTB Bank against KAP.
Montenegro’s parliament approved the nominations for new agriculture minister from the opposition’s quota, as well as new deputy prime minister, also from the opposition. Azra Jasavic, the deputy leader of the opposition Pozitivna Crna Gora, will become a Deputy Prime Minister, while Budimir Mugosa will head the agriculture ministry.
Italy’s A2A has agreed to participate jointly with Montenegro’s government in the construction of a second unit at the Pljevlja thermal power plant, according to the Deputy Prime Minister Vujica Lazovic.
Montenegro’s parliament approved on June 28 an agreement with a consortium between Italy’s Eni and Russia’s Novatek on offshore oil and gas exploration.

Key points:

• The consumer prices declined by 1% y/y in May
• The number of foreign tourists visiting Montenegro increased by 8.1% y/y to 94,297 in May
• Industrial output increased by 9.1% in May
• Bank assets rose 7.9% y/y to €3.48bn as of the end of May

Table of Contents

EXECUTIVE SUMMARY 4
REAL SECTOR 5
1. GDP 5
Montenegro’s GDP growth slows to 1.1% y/y in Q1 5
World Bank improves Montenegro’s 2016 GDP growth forecast to 3.7% 5
2. Inflation 5
Montenegro reports HICP deflation of 0.3% y/y in May 5
Montenegro's PPI swings to 0.2% y/y fall in May 6
Montenegro’s consumer prices fall further y/y in May 6
3. Industry and Trade 6
Montenegro's retail sales grow by 2.8% y/y in May 6
Montenegro's industrial sales decline further in May 7
Montenegro’s industrial output resumes growth in May 7
Montenegro's retail sales grow by 2.4% y/y in April 8
4. Labour Market 8
Montenegro’s unemployment rate declines to 17.25% on July 4 8
Montenegro’s monthly average net wage grows 4.2% y/y in May 8
Montenegro’s unemployment rate rises to 19.1% in Q1, Labour Force Survey shows 9
Montenegro’s unemployment rate declines to 17.32% on June 6 9
5. Tourism 10
Foreign tourist arrivals in Montenegro rise 8.1% y/y in April 10
FISCAL SECTOR 10
Montenegro’s public debt reaches 59.7% of GDP at end-March 10
FINANCIAL INTERMEDIATION 11
IMF warns Montenegrin banks of inadequate loan-loss provisioning 11
Average lending interest rate in Montenegro falls to 7.75% in May 11
Montenegro’s bank deposits growth eases to 10.4% y/y in May 12
Montenegro’s bank assets growth slows further in May 12
EXTERNAL SECTOR 13
Montenegro’s 5-mo trade gap widens 18.7% y/y 13
Montenegro’s Jan-Apr net FDI shrinks to €26.5mn 13
STRUCTURAL REFORMS AND CORPORATE NEWS 14
Montenegro’s economy ministry says law on repayment of KAP obligations to workers unconstitutional 14
Montenegro to invest €268.5mn in modernising industrial sector in 2016 14
Italy’s A2A vies to build second unit at TE Pljevlja, Montenegro’s Deputy PM Lazovic says 15
Montenegro’s parliament approves offshore oil, gas exploration deal 15
Montenegro’s power monopoly separates transmission unit 16
Montenegro’s economy committee head seeks information on media’s tax debt 16
Montenegro’s MANS files claim against sale of land in Buljarica for tourist resort 17
Montenegro plans construction of 46 hotels at Durmitor mountain 17
Montenegro’s tax authority initiates forced tax collection against several private media 17
World Bank to lend up to 0mn to Montenegro in 2016-2020 18
Azerbaijani-owned Azmont Banka starts operating in Montenegro 18
Former workers of Montenegro’s KAP file claim against PM Djukanovic over unpaid severance 19
London court dismisses request for arbitration on VTB's claim against Montenegro’s KAP 19
Lustica Development to spend €90mn on infrastructure at luxury marina in Montenegro 20
EBRD to focus on tourism, agriculture, energy, infrastructure projects in Montenegro 20
POLITICS 20
Montenegro forms team to ensure fair and transparent electionst 20
EU, Montenegro open chapters on food safety, fisheries in accession talks 21
Brexit could have only an indirect effect on Montenegro’s economy, central bank says 21
Montenegro’s parliament approves new deputy PM, agriculture minister 22
Support for Montenegro’s ruling DPS party declines, new poll suggests 22
Former president Marovic resigns from post in Montenegro’s ruling DPS 23
Montenegro’s newly-elected agriculture minister to resign 24

Number of pages: 24
Release Date: Sun, 17 Jul 2016