Montenegro’s 2024 economic overview: Inflation, employment and foreign trade trends

In 2024, the average inflation rate in Montenegro was 3.3%, the lowest since 2021, according to data from the Ministry of Finance’s December Macroeconomic Report.

The report indicates that the highest contribution to the increase in consumer prices came from the “housing, water, electricity, gas, and other fuels” category (0.8 percentage points) and clothing and footwear (0.6 percentage points).

“Since September, there has been a monthly decrease in prices, influenced by government measures to limit retail margins. Food prices in December dropped by 1.2% compared to November,” the report states.

The data also shows that in the first eleven months of 2024, the number of overnight stays by domestic and foreign guests in collective accommodation reached 5.12 million, marking an annual increase of 1.5%. Among foreign guests, the largest number of overnight stays came from tourists from Serbia (19.4%), the United Kingdom (8%), Germany (7.2%), and France (6.6%).

Retail trade turnover increased by 10% in the first eleven months. During the same period in the previous year, the value of the purchase and sale of agricultural, forestry, and fishing products saw an annual increase of 1.5%, according to the report.

Employment and income

The document notes that the labor market continues to show favorable trends. The average number of employed individuals in the first eleven months of 2024 was 257,400, marking a 5.3% increase compared to the same period in 2023.

The registered unemployment rate in November was 11.4%, a decrease of 2.65 percentage points year-on-year. The average net salary was 23% higher compared to November 2023, driven by the implementation of the “Europe Now 2” program and increases in the minimum and average wage. The average pension was 521.75 EUR, an increase of 22.5% compared to the same month last year.

Fiscal sector

The Ministry of Finance reports that budget revenues from January to November 2024 amounted to about 2.5 billion EUR, or 34.3% of the estimated GDP, which is an increase of 185.1 million EUR, or 8%, compared to the same period last year.

“Compared to the rebalanced plan, budget revenues were 7.6 million EUR, or 0.3%, higher. Excluding one-off revenues, budget revenues for the eleven months of 2024 were 331.8 million EUR, or 15.5%, higher than the corresponding period of 2023,” the data reveals.

Budget expenditures totaled 2.49 billion EUR, or 34.3% of the estimated GDP. Compared to the same period in 2023, expenditures were up by 342.7 million EUR, or 15.9%. The largest increase occurred in pension and disability insurance spending, primarily due to increases in minimum pensions, transfers to institutions, and significant growth in public health institutions and gross salary allocations (following the adoption of sectoral collective agreements that raised wages in the public sector in 2023).

“Compared to the 2024 budget plan, expenditures were 200.5 million EUR, or 7.4%, lower, reflecting the dynamics of obligations in this period and active expenditure management. Over the 11 months, the budget recorded a deficit of 0.4 million EUR, which is a 208.1 million EUR improvement compared to the planned budget balance,” the report states.

Financial sector

According to the Central Bank of Montenegro, the net profit of Montenegrin banks in November 2024 amounted to 161.9 million EUR, an increase of 13.1% compared to the same month last year.

“Total loans at the end of November amounted to 4.65 billion EUR, reflecting an annual growth of 14%,” the report says.

Newly approved loans amounted to 1.58 billion EUR in the first eleven months, marking a 30.3% year-on-year growth. Of that, business loans accounted for 780.4 million EUR, a 24.2% increase, while loans to individuals amounted to 746.3 million EUR, representing a 42.1% increase compared to last year.

“In November, total deposits rose by 5.6%, reaching 5.74 billion EUR. The average weighted effective interest rate on newly approved loans in November was 5.98%, a decrease of 0.54 percentage points compared to November 2023,” the macroeconomic report notes.

Foreign trade and investments

In terms of foreign trade, from January to November 2024, Montenegro’s foreign trade turnover amounted to 4.26 billion EUR, an increase of 3.7% compared to the same period in 2023.

“Exports, amounting to 546.7 million EUR, were down by 11.4%, primarily due to a 52.6% decrease in electricity exports and a 49.3% drop in aluminum exports. Imports, totaling 3.71 billion EUR, increased by 6.4%, mainly driven by an increase in imports of machinery and transport equipment (up 11.7%), chemical products (up 9.1%), mineral fuels and lubricants (up 8.6%), and food products (up 3.4%),” the Ministry of Finance explained.

The net inflow of foreign direct investment (FDI) for the eleven months of 2024 was 453.8 million EUR, representing a 17.2% increase compared to the same period in 2023. Total FDI inflow amounted to 801.7 million EUR, a 3.1% increase compared to January-November 2023.

“In the structure of equity investments, investments in companies and banks amounted to 109.8 million EUR, an increase of 17.9%. Investments in real estate totaled 400.8 million EUR, a 3% decrease,” the document adds.

The inflow of FDI in the form of intercompany debt totaled 262 million EUR, marking a 10.1% increase compared to the period from January to November 2023.

“Total FDI outflows amounted to 347.9 million EUR, a 10.9% decrease compared to 2023. The largest share of FDI inflows came from Serbia (107.4 million EUR), Russia (94.1 million EUR), and Turkey (91.2 million EUR), together accounting for 36.5% of total FDI inflows,” the report concludes.

International environment

On the international front, according to the European Central Bank’s (ECB) macroeconomic projections from December, the eurozone economy is expected to continue its gradual recovery in the coming years despite geopolitical uncertainties.

“Real GDP is projected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026, and 1.3% in 2027. Compared to the ECB’s September projections for 2024, the growth outlook has been slightly revised down. Projections also indicate a rise in inflation towards the end of 2024, followed by a decline and stabilization around the target of 2% from the second quarter of 2025,” the report notes.

In comparison to the September projections, inflation expectations for 2024 and 2025 have been slightly revised downward, mainly due to assumptions of lower oil and electricity prices.

“The ECB forecasts inflation in the eurozone at 2.1% in 2025 and 1.9% in 2026, down from 2.4% in 2024,” the document concludes.