The International Monetary Fund (IMF) Executive Board has concluded its 2025 Article IV Consultation with Montenegro, assessing the country's economic resilience and future challenges. The report highlights Montenegro's strong economic recovery post-pandemic, with growth averaging around 9% annually between 2021 and 2023, supported by favorable external factors. However, the growth has moderated to 3.2% in 2024 and the first half of 2025, indicating a need for economic diversification and rebalancing.
The fiscal position has weakened, and without new measures to control expenditures and increase revenues, the deficit is projected to exceed 4% of GDP by 2030. The public debt-to-GDP ratio is expected to rise gradually to around 65% by 2030. The external position is also weakening, partly due to temporary factors, and the economy needs to rebalance away from consumption through diversification to attract higher foreign direct investment and reduce external imbalances.
The report emphasizes the importance of safeguarding the operational independence of the central bank for financial stability. The banking system is considered healthy, but the authorities are encouraged to monitor for early signs of stress and maintain robust supervision. The development bank should focus on expanding credit access to underserved sectors and regions, avoiding activities that could generate fiscal or financial stability risks.
The Executive Board commends Montenegro's resilience but notes the need for adaptation to future challenges. They emphasize the importance of strengthening the fiscal policy framework and structural reforms to diversify the economy, addressing vulnerabilities in the tourism-dependent economy. The accession process to the European Union (EU) is seen as an anchor for necessary reforms.
The report highlights the need for aligning fiscal strategy with the economy's cyclical position and the requirements of the Fiscal Responsibility Law. Long-term spending pressures due to population aging, health, climate, and defense will increase, necessitating fiscal structural reforms. These reforms include improving civil service and healthcare efficiency, better targeting of social benefits, and enhancing public investment management.
In conclusion, the IMF's Article IV Consultation underscores the importance of continued structural reforms to strengthen economic resilience and support higher-quality growth, aligning wage and productivity growth, and integrating climate policy objectives with those of the EU.
