Montenegro Country Report - May, 2015

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Montenegro Country Report - May, 2015

This report covers the key macroeconomic and financial releases as well as the political events from Montenegro for the period of May 6 – June 5, 2015.
Standard & Poor's said it has affirmed Montenegro’s B+/B long-term and short-term foreign and local currency ratings with stable outlook on expectations for strong economic growth of an average 3.4% per year in 2015-2018, backed by increased investment activity.
Moody’s said in a report that Montenegro's fiscal strength has been worsening in the wake of the double-dip recession of 2008-09 and 2012, reflected in its debt-to-GDP ratio which has increased to almost 58.0% in 2014, more than doubling from 2007's 27.5% level.
The European Bank for Reconstruction and Development (EBRD) left unchanged its 2015 economic growth forecast for Montenegro at 3% in the May edition of its Regional Economic Prospects report. The growth should be supported by the construction of the first priority section of the Bar-Boljare motorway from Smokovac to Matesevo.

Key points:

• The budget deficit contracted by 4.3% y/y to €64.5mn in January-April
• The number of foreign tourists visiting Montenegro increased by 19.8% y/y in April to 37,125, speeding up from a 7.4% y/y hike in March
• Industrial output rose 11.4% y/y in April, slowing from a 19.3% y/y growth in March
• Unemployment rate declined to 13.95% as of June 1
• Bank assets rose 7.6% y/y to €3.18bn at end-April, speeding up from a 5.7% annual growth the month before

Table of Contents

EXECUTIVE SUMMARY 3
REAL SECTOR 4
1. GDP 4
EBRD keeps Montenegro’s 2015 GDP growth forecast at 3.0% 4
2. Inflation 4
CPI inflation speeds up to 2.1% y/y in April 4
HICP inflation speeds up to 1.3% y/y growth in April 5
PPI inflation slows to 0.3% y/y in April 6
3. Industry and Trade 7
Industrial output climbs 11.4% y/y in April 7
Industrial sales shrink 16.8% y/y in April 7
Retail sales decline 1.5% y/y in April 8
4. Labour Market 8
Monthly average net wage rises 0.8% y/y in April 8
Unemployment rate falls to 13.95% in early June – employment agency 8
5. Tourism 8
Foreign tourist arrivals rise 20% y/y in April 8
FISCAL SECTOR 9
Jan-Apr budget gap narrows 4.3% y/y to €64.5mn 9
FINANCIAL INTERMEDIATION 11
Bank assets growth accelerates to 7.6% y/y at end-April 11
Bank deposits growth speeds up to 11.6% y/y in April 11
Average lending interest rate falls to 9.01% in April 12
NPL ratio down to 15.8% in March – c-bank 12
Number of banks in Montenegro to fall – industry official 12
Combined net profit of Montenegro’s banks shrinks 76% y/y to €2.3mn in Q1 13
EXTERNAL SECTOR 13
Current account gap widens 8.1% y/y to €525.8mn in 2014 13
Net FDI inflow up 9.3% y/y to €86.2mn in Q1 14
Trade gap widens 2.9% y/y in Jan-Apr on falling exports 14
Montenegro needs to take adequate measures to reduce public debt – finance minister 15
Montenegro’s public debt rises 25% y/y to €2.44bn at end-March – report 15
STRUCTURAL REFORMS AND CORPORATE NEWS 16
EIB to provide Montenegro €10mn for water network upgrades 16
Abu Dhabi Fund for Development, Montenegro sign mn loan for agriculture projects 16
Montenegro to open tenders for construction of small HPPs on three rivers 16
Montenegro’s ACG seeks consultant for construction of second terminal at Tivat airport 16
Qatari Diar to launch construction of luxury hotel in Montenegro 17
Montenegro seeks ways to keep Chinese loan cheap 17
Moody’s says Montenegro’s worsening debt profile is mitigated by high debt affordability 18
Montenegro expects to sign new agreement on EPCG Management – Deputy PM Lazovic 19
S&P affirms Montenegro’s B+/B ratings on expected economic growth 19
Montenegro calls consultancy services tender for €23.5mn local roads upgrade 20
Montenegro to set up SPV for the 250 MW thermal power unit 20
China’s CRBC launches construction of Montenegro’s key Bar-Boljare motorway 21

Number of pages: 21
Release Date: Sun, 14 Jun 2015