He said that the EBRD predicted that Montenegrin economy growth would be 4% this year supported the construction sector, which should rise mainly due to the construction of the priority section of the highway from the Adriatic coast to the border with Serbia.
“Investments in tourism and energy sectors should also support the economy during this period. In addition, the recovery of the two largest economies in the region, Croatian and Serbian, with which Montenegro has significant economic ties, should have positive effects for the country,” he added in his interview with Mina Business news agency.
According to him, after the disappointing 1.8% growth in 2014, increase in growth was expected in 2015 and its continuation in 2016.
“In fact, economic activity accelerated in the first quarter last year. Industrial production increased by 6.7% annually and tourist indicators are strong. The number of tourists who visited Montenegro in the first six months of last year was 13.8% higher than in the comparative period in 2014”, said Moreno.
Commenting on the fact that Montenegrin economy is highly dependent on tourism, Moreno said that the Russian market and the market of neighbouring countries constitute about two thirds of total arrivals.
“Whereas arrivals from Russia decreased 8% in the first eight months of last year due to the deteriorated situation in the country and the depreciation of the rouble, arrivals from the region, especially Serbia and Bosnia and Herzegovina, significantly increased. However, it is interesting that the reduction of Russian tourists was less than in other countries of Southeast Europe – perhaps due to the high share they have in real estate ownership,” said Moreno.
As he said, Montenegro should expect a modest profit from the drastic reduction in oil prices, since it is an importer of oil where the net oil import makes 5.4% of gross domestic product (GDP).
“The state should also have, to some extent, the benefits from the fall in food prices, having in mind the fact that net food imports constitute 12% of the country’s GDP. In combination with foreign direct investment (FDI) and the progress in the highway construction, growth in 2015 would probably be about three percent,” Moreno reminded.
Speaking about the attractiveness of the business environment in Montenegro for foreign investors, Moreno noted that over the years Montenegro established business friendly legislation and openness to foreign investors to a large extent.
“The country is regularly at the top of the regional list of countries in terms of FDI per capita. It is ranked 46 out of 189 countries on the World Bank’s ease of doing business index. At the same time, Montenegro made further progress in approaching the EU. Since July last year, Montenegro has opened 20 chapters out of 35, and provisionally closed two. However, there is a lot of work to be done. EBRD-World Bank Business Environment and Enterprise Performance Survey (BEEPS) revealed that the three main obstacles to the business environment that have been identified in the Montenegrin companies were actions of competitors in the informal sector, access to financing and electricity issues,” he said.
As headed, a little progress was made in privatisation.
“The privatisation plan announced in February last year predicted continuing privatisation and calling tenders related to tourism, manufacturing and Montenegro Airlines. However, since the announcement of the plan, little progress has been made in the sale of these assets,” he said.
Asked about the most important economy sectors that can generate the country’s economic growth, Moreno pointed out that tourism was certainly one of the most important sectors of the economy which would lead to future economic growth.
“The role of the sub-sectors that support tourism activities in the country, such as accommodation and providing food, rentals and real estate business, which currently accounts for 8% of the economy, will certainly grow, reflecting the growing importance of Montenegro as a tourist destination, with about 1.4 million foreign arrivals annually. With 5% share, the utilities sector, primarily electric power generation is relatively important for the Montenegrin economy. With the current projects in the energy sector, we expect it to become a significant growth driver in the future,” he added.
According to him, the potential benefits of developing a regional electricity market are high.
Country and region are rich in hydropower potentials and the construction of the submarine power cable connecting Montenegro and Italy will open markets for electricity export. The construction sector, with current 5% share in economic activity, is likely to be the largest driver of economic growth in the future, which will be supported by the construction of the first section of the Bar-Boljare highway. Agriculture, together with forestry and fishing, has a 10% share in GDP, and its social significance is even greater, with the potential for growth in the future. However, the challenges that affect the agricultural sector in Montenegro, as well as the region of the Western Balkans, are related to a significant gap when it comes to technology and infrastructure, whereby deficiencies in the collection, storage, marketing, distribution and management of the system affect the quality and safety of products”, Moreno warned.
