Montenegro’s budget deficit in the first quarter of 2025 was €63.9m, significantly better than the planned €120.8m. This deficit represents 0.8% of the country’s estimated GDP. While economist Maja Bacovic notes that this result is not alarming, she emphasises that the country would be better off with no fiscal deficit at all, especially from a development and public debt management perspective.
Revenues for Q1 totalled €580.4m, which is a slight increase compared to the same period last year. However, the country fell short of its planned target by €13m, mainly due to a reduction in social contributions resulting from the “Europe Now 2” programme, which cut pension contribution rates. VAT and excise tax revenues saw significant increases, with VAT growing by 11.9% and excise revenue on tobacco products rising by 19.4%. Corporate income tax receipts were slightly lower than planned, partly due to an extended deadline for tax filings.
Expenditures in the Q1 amounted to €644.3m, a 10.4% increase from the previous year, largely driven by higher mandatory spending. However, expenditures were 9.8% lower than planned, indicating a delay in obligations. Bacovic highlighted that lower-than-expected capital spending is concerning, as it could hinder long-term growth and investment. She also pointed out that reduced pension contributions might lead to higher transfers to the Pension Fund, potentially increasing the budget deficit if other savings are not found.
The budget’s performance in the Q1 was influenced by seasonal revenue fluctuations, particularly in the tourism sector. Bacovic warned that if the summer tourist season fails to meet expectations, the government might face difficult choices, such as cutting current expenditures or borrowing to cover the deficit.
