All things considered, 2019 was a good year from the economic point of view. Given everything that was going on, I think Montenegro’s Government and economy passed the exam with high grade. GDP growth rate in the third quarter amounted to 4,7%, whereas the EU recorded a 1,7% GDP growth.
Such data is a cause of optimism that growth rate next year will be even higher. So far, my projections have always tuned out to be accurate”, says in the interview for Dnevne novine professor of the Faculty of Economics and President of the Association of Economists of Montenegro, Mr Božo Mihailović.
He reminds that this year Montenegro recorded dynamic economic activity which resulted in high economic growth rates and GDP and in intense investment activities. Trust of foreign investors in Montenegrin economy is considerable – FDI recorded a 22,5% increase.
What else marked the year behind us?
Mr MIHAILOVIĆ: Low inflation, amounting to only 0,3%. The fourth positive indicator if reduction in unemployment rate. The fifth one is public finances stability. It’s important to notice that public debt increase happened due to increased investments, not current expenditure.
Another very important thing is that Montenegro is at 48% level of GDP average in comparison to the EU Member States average. The highest GDP per capita has Luxembourg, 261% of the European average. Bulgaria has GDP 51% of the EU average, and it’s been EU member for years.
What could have been better?
Mr MIHAILOVIĆ: There’s a rule in economy, just like in military- it can always be better, no matter how good it is. There’s still problem related to the foreign economy component. Total foreign trade activity amounted to €2,6 billion. However, export is not good enough, amounting to only €374 million, whereas import coverage is 15,7%. That’s the weakest point of our economy. Also, industrial production could have been greater. I think that’s the area we should really work on…
Budget for 2020 is projected to amount to €2,64 billion. Finance Minister, Mr Darko Radunović, says that basic characteristic of the budget is its ability to enable continuous economic growth.
Mr MIHAILOVIĆ: Budget is the plan of revenues and spending of a country for a coming year and there’s always problem with that revenues element. I always say that we should start from spending and find solutions there. As I already said, spending should be reduced by 5%. Why? Because it would be around €130 million and our interests amount to over €100 million. We should feel the need to save a little. I know it is impossible for some, but I’m talking generally.
I welcome increased investment in healthcare system, education and science, and I praise investment in agriculture. It’s investment in development.
Opposition members claim that the budget is based on the borrowed money and that it is “electoral”.
Mr MIHAILOVIĆ: I’ve never heard of such a term before. Budget is simply plan for revenues and spending.
Also, economic growth isn’t based on the borrowed money. That’s not true. And what does it mean in the first place? Government and IMF applied the domestic logic meaning that we borrowed money and paid lower interest rates. It’s important we restructure loans and borrow less.
Is the economic growth rate projected for the next year (3,4%) real? What are your estimates?
Mr MIHAILOVIĆ: I have to remind you that my growth forecasts were higher that forecasts made by relevant institutions. With all due respect, I was more accurate.
What about 2020?
Mr MIHAILOVIĆ: I think economic growth rate will amount to 3,4%, just like planned. Why do I think so? Economy is like a river, you can’t stop it once it becomes dynamic.
What I’m saying is that we have positive tendencies and we have reasons for optimism. Intense economic activity, great investments in agriculture, intense investment activity, higher number of employed people, better financial discipline, great results in tourism and other domains…
According to the World Bank, public debt is expected to decline starting from 2021. If that happens, what benefits citizens of Montenegro could expect?
Mr MIHAILOVIĆ: If that happens, and according to all parameters it will happen, living standard could slightly increase. On average. As far as private sector is concerned, standard depends on the results achieved by every individual company.
We shall not be unhappy if we keep this same level of standard.
What will be the biggest challenge for Montenegrin economy next year?
Mr MIHAILOVIĆ: There are many challenges. Even the most developed economies have challenges. But we should do what we are supposed to do. We must understand that there are no results without hard work, order, discipline and responsibility.
As for the challenges, it all boils down to five things. Firstly, we have to achieve the economic growth we had planned. Secondly, we have to balance the budget, then reduce unemployment, and develop entrepreneurial society. The fourth thing is to service public debt, restructure it and reduce it gradually. The last bit not least thing we must do is improve living standard.
Airports issue also causes many arguments. There is discrepancy within governing coalition as well…
Mr MIHAILOVIĆ: I will reiterate my view. The tender is on, but we must choose wisely who we will negotiate with before we make final decision. As an economist, I think it’s important to answer the following question: If Montenegro can’t bring the airports to the European level, then the decision is right, but we must see who our partner is. We only have two airports, therefore we must choose wisely and see what is that Montenegro gets, how it can benefit.
What are your recommendations to the Government for the coming year?
Mr MIHAILOVIĆ: I don’t think I am really competent to give recommendations. But I know a little about the economy of Montenegro and, therefore, I’ll say that Montenegro mist continue with intense economic strategy which means investing in future, and is based on the increase in competitiveness, regional development… We must continue with wide entrepreneurial activity.
We must constantly take care of the stability of public finances, reduction of grey economy, restructuring economy and debt. We should keep stimulating investment in real sector.
And finally, saving money.
Currently, economic questions are mostly related to the support for the national airline company. Government thinks it’s a necessary step, whereas opposition thinks it’s wrong…
Mr MIHAILOVIĆ: As I said earlier, we must analyze pros and cons of MA going bankrupt. That’s the easiest thing we can do.
Montenegro is a very strong air-destination and any plan related to MA is helpful. Management and Board of Directors should take responsibility for the steps they make. It’s up to them top make projections for the next several years.
