Business environment in Montenegro hinders retail growth and contributes to high prices

The business environment in Montenegro is not favorable, and new retail chains face numerous obstacles, according to economist and founder of BI Consulting, Ratko Nikolić. He was speaking on the show “Na kraju dana” on TV E.

Nikolić pointed out the example of Lidl, which registered its company in Montenegro almost four years ago in March, but still has no operational stores.

The NGO Alternativa Crna gora has previously called for two one-day boycotts, and now for this week-long action. Given that the national budget primarily relies on VAT, there is concern over how the boycott might affect the budget.

“It is interesting that some voices from the government supported such an approach without much consideration, shifting the focus from the government, which is primarily responsible for the situation, to the retail chains. These chains might contribute to the issue, but definitely not before the government is held accountable,” said Nikolić. He added that there are factors beyond the control of retail chains that contribute to high prices.

Nikolić explained that Montenegro has faced increased demand, driven by higher net wages and a large influx of foreign visitors in 2021 and 2022. With increased demand in a market where supply is limited, price increases are inevitable, he said.

Montenegro is heavily reliant on imports, he noted, and a significant portion of the inflation has been imported from other countries. Additionally, VAT and excise taxes in Montenegro are notably higher.

“The business environment here is not attractive, and new retail chains face many challenges. A direct example is Lidl, which registered its company in Montenegro nearly four years ago, but still has no operational stores. The experience they faced in starting their business here could provide valuable lessons for decision-makers to improve the business climate. The arrival of new chains and increased competition is, in the long term, the most important measure against high prices,” concluded Nikolić.