Montenegro Country Report - September, 2015

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Montenegro Country Report - September, 2015

This report covers the key macroeconomic and financial releases as well as the political events from Montenegro for the period of September 6-October 5, 2015.
A coalition that has held together for almost 20 years is on the brink of collapse in Montenegro, where early elections are expected to be called for spring 2016.
Meanwhile, a protest rally, organized by Montenegro’s opposition Democratic Front (DF), started in the capital Podgorica on September 27, gathering between 1,500 and 5,000 people in front of the parliament building.
On the corporate side, Montenegrin unit of Hypo Alpe Adria Banka has filed a claim at the constitutional court, challenging the constitutionality of the law on the conversion of Swiss franc-denominated loans into euro. At the same time, Nebojsa Medojevic, leader of Montenegro's political party Movement for Changes (PzP), has filed a claim with the supreme court against Montenegrin unit of Hypo Alpe-Adria Banka and its executive director, Christof Schoen.
Economic crime inspectors will start investigating the operations of Montenegro’s flag carrier Montenegro Airlines.

Key points:

• The budget deficit increased more than three times y/y to €232.7mn in the first eight months of 2015 from €65.4mn a year earlier
• The number of foreign tourists visiting Montenegro increased by 11.8% y/y to 509,959 in August, slowing significantly from a 33.4% y/y rise in July
• Industrial output ended its upward trend in August, declining by 0.1% y/y
• Bank assets rose 10.8% y/y to €3.46bn at end-August

Table of Contents

EXECUTIVE SUMMARY 3
REAL SECTOR 4
1. GDP 4
C-bank says H1 GDP up 3.5% y/y 4
Montenegro revises 2015 GDP growth forecast up to 4.3% on higher investment activity 4
GDP growth brakes to 1.9% in 2014 – final figures 5
GDP growth boosts to 3.4% y/y in Q2 5
2. Inflation 6
CPI inflation stays at 1.9% y/y in August 6
PPI inflation almost flattens y/y in August 7
HICP inflation at 2.1% y/y in August 7
3. Industry and Trade 8
Industrial output swings to 0.1% y/y fall in August 8
Industrial sales swing to 5.4% y/y decline in August 8
Retail sales growth boosts to 4.6% y/y in August 9
4. Labour Market 9
Unemployment rate rises to 14.22% in early September – employment agency 9
Unemployment rate falls to 17.7% in Q2 - Labour Force Survey 9
Monthly average net wage grows 0.8% y/y in August 10
Montenegro to invest €2.4mn by end-2015 to boost employment 10
5. Tourism 10
Montenegro sees 2015 summer tourism revenue at €720mn 10
Foreign tourist arrivals to Montenegro slow their growth to 11.8% y/y in August 11
FISCAL SECTOR 11
FINANCIAL INTERMEDIATION 13
Bank assets boost growth to 10.8% y/y at end-August 13
Average lending interest rate in Montenegro falls to 9.05% in August 13
Bank deposits growth improves to 15.3% y/y in August 13
EXTERNAL SECTOR 14
Public debt rises 6% y/y to €2.5bn at end-June on motorway loan 14
Russia tops list of foreign investors in Montenegro in H1 15
Trade gap widens 6% y/y in January-August 15
Montenegro repays €157mn debt in H1 15
net FDI inflow rises 20.5% y/y to €220.7mn through July 16
STRUCTURAL REFORMS AND CORPORATE NEWS 16
Montenegro, A2A resume talks on EPCG’s management 16
Montenegrin unit of Hypo Alpe-Adria-Bank challenges in court CHF loan conversion law 17
UAE companies interested to invest in Montenegro 17
PzP files claim against local unit of Hypo Alpe-Adria-Bank on CHF loans 18
Italy’s A2A reportedly might sell stake in EPCG to Montenegro’s government for €260mn 18
Submarine power link with Italy to be operational in 2017 – CGES’ Laketic 18
World Bank sees growth in non-EU Southeast Europe speeding to 1.8% in 2015 19
China's CRBC delays launch of main works on Smokovac-Matesevo stretch to mid-October 20
Montenegro’s interior ministry to investigate flag carrier Montenegro Airlines 20
Montenegro seeks 10-15 days extension of negotiations with Italy’s A2A on management of EPCG 20
POLITICS 21
Montenegro likely to hold general elections in spring 2016 21
Opposition DF begins series of anti-govt protests, up to 5,000 participate 23

Number of pages: 24
Release Date: Sat, 10 Oct 2015