Economy of Montenegro

Theeconomy of Montenegrois currently in a process oftransition, as it navigates the impacts of theYugoslav Wars, the decline of industry following the dissolution of theYugoslavia, andeconomic sanctionsimposed by theUnited Nations.Montenegrojoined theWorld Trade Organizationon 29 April 2012.Montenegro joinedtheNorth Atlantic Treaty Organizationon 5 June 2017.
As a relatively small principality founded in 1852,Montenegro's economy was originally wholly based in agriculture, but it began developing an industrial economy at the turn of the 20th century. Growth was hampered by its small population, lack of raw materials, an underdeveloped transport network, and a comparatively low rate of domestic and international investment.
The first industrial enterprises built in Montenegro werewood mills, anoil refinery, abrewery,salt works, and electricpower plants. Economic development was interrupted by several wars, including theFirst Balkan War(1912–13),World War I(1914–18), andWorld War II(1939–45). Throughout the first half of the 20th century, agriculture continued to dominate Montenegro's economic activity.
Montenegro's economy was developed significantly after World War II, as the country was integrated into theSocialist Federal Republic of Yugoslaviaand experienced a period of rapid urbanization and industrialization. Its industrial sector included the generation of electricity,steelandaluminumproduction,coal mining,forestryandwood processing,textiles, and tobacco manufacturing, while international trade, shipping, and tourism became increasingly important by the late 1980s.
Following the dissolution of Yugoslavia in the early 1990s, Montenegro's entire industrial production system effectively collapsed, leading to shortages of many goods and skyrocketing prices for them. Due to its political alliance with Serbia and favourable geographic location, with access to theAdriatic Seaand a shipping-link toAlbaniaacrossLake Skadar, Montenegro became a hub for smuggling activity during the 1990s. The smuggling of petrol and cigarettes, in particular, became a de facto legalised practice within the country.
In 1997,Milo Đukanovićtook control of Montenegro's ruling party, theDemocratic Party of Socialists of Montenegro, and began severing political ties withSerbia. He blamed the policies of Serbian PresidentSlobodan Miloševićfor the overall decline of the Montenegrin economy. Resurgent inflation led the Montenegrin government to "dollarize" the economy, adopting theGerman markas its dominant currency.These economic policies also led to a revision in 2003 of the relationship between the two countries from a federal republic to a much looser political union ofSerbia and Montenegro, in which the Montenegrin government assumed responsibility for its own economic policies.
The union did not last and on 21 May 2006, the people of Montenegro voted byreferendumto declare independence from Serbia.
Following the independence referendum, Montenegro's economy has evolved to highlight its service sector, with a goal of becoming an elite tourist destination, and isnavigating the process of joiningtheEuropean Union. Attempts to attract foreign investors for large infrastructure projects are ongoing, as these projects are integral to its development as a tourist destination.
Montenegro experienced a real estate boom in 2006 and 2007, with wealthyRussians,Britonsand others buying property on the Montenegrin coast. As of 2008, Montenegro received more foreign investment per capita than any other nation in Europe.
In the first half of 2012, Montenegro exported goods, mostly metals, worth €182.3 million, which was 14.6% less than in the same period of the preceding year. Its major export partners include Croatia, Serbia, Bosnia and Herzegovina, and Hungary. Montenegro's imports in the first half of 2012, mostly food, oil, and electrical energy, were worth €864.9 million, which was 2.6% more than the same period in 2011. Its major import partners include Serbia, Greece, and Bosnia and Herzegovina.
In 2022, the sector with the highest number of companies registered in Montenegro is Services with 15,496 companies followed by Retail Trade and Wholesale Trade with 11,200 and 6,839 companies respectively.
TheCentral Bank of Montenegrowas founded in 2001 and shortly thereafter adopted theeuroas the currency of the country in March 2002.
The banking sector of Montenegro has a significant share of foreign capital. Banks in Montenegro provide both retail and corporate banking products under one roof, and most offer non-resident accounts, usually to both natural persons and legal entities.
TheMontenegro Stock Exchange, founded in 1993, was strengthened in 2011 when it merged to become the sole stock exchange in the country. It is owned by a number of financial institutions.
In the2007 Great Recessionthe economic growth slowed, as several infrastructure projects, such as the development ofVelika Plaža,Ada Bojana,Buljarica,Jaz Beach, and the construction of theBar-Boljare motorwayand newpower plantshad to be postponed.
ThePort of Baris the country's primary communication with the maritime trade. Its terminal is specialized in bulk shipment of bauxite and other ores, grain, wood products, acetic acid and petroleum derivatives. In 2019 its allowable draft was reported as 12.8m and several private storage tanks exist on site, to service trade.Ro–Ro traffic fromBariandAnconais handled through an operational quay which is 400m long with water depth of between 4m and 5.9m.
The 2007 recession was difficult for thePodgorica Aluminium Plant, which was initially built in 1969 and was the biggest single contributor to the Montenegringross domestic product. The plant, first sold toOleg Deripaska'sEn+ Groupin 2005, declared bankruptcy in 2013 and was sold to local magnateVeselin Pejovic'sUnipromin 2014.
With 300km of coastline, backed by mountains, Montenegro is proving to be a desirable holiday destination and generated around 25% of Montenegro's GDP.Covid restrictionsin 2020 saw Montenegro suffer a 15% drop in GDP and high unemployment in the tourist sector before rebounding in 2021.Montenegro prefers luxurious and upscale projects to attract tourists, encouraging foreign investment to create the facilities.
Elektroprivreda Crne Gore(EPCG) is the mainly state-owned coal and power producer and distributor which owns two large hydroelectric plants and a coal powered thermal power plant.
Two wind power farms are in operation, Krnovo Wind Farm and Možura Wind Farm which generate a total of 118MW.
In June 2023 APCG obtained €82m finance to build the Gvozd wind farm which will generate 54.6 MW.A new wind farm, the Bijela wind farm is planned with 118MW capacity following UAE based Alcazar Energy acquiring the rights in 2023 to spend $200m building the farm.
In 2023 Montenegro exported around €200m worth of electricity (2022 €140m) becoming the top export item for the country.
In July 2006 prior to EU integration efforts a survey document was produced by the Ministry of Agriculture, Forestry and Water Management for the EU-funded projectAgriculture and Rural Development Strategy of Montenegro.TheStatistical Office of Montenegrolearned as late as November 2021 how to collect its data in formats acceptable to theEuropean Commission.
Since 2010 agricultural trade relations between the EU and Montenegro have been governed by theEU-Montenegro Stabilisation and Association Agreement, and with the exception of beef, sugar and wine all agricultural products originating in Montenegro can enter the EU duty free. The EU has a large agri-food trade surplus with Montenegro, and exports meat, dairy and food preparations. The EU mainly imports vegetables such as mushrooms, wine and oils from Montenegro.
It was reported by the ECDirectorate-General for Agriculture and Rural Developmentin March 2019 that the share of agriculture in Montenegro'sGDPwas 8%. Agricultural land accounts for 38% of the total. Olives and citrus fruits are grown in the coastal region, while seasonal vegetables and tobacco are produced in the central areas. In the north of the country ungulates dominate the farming.The largest share of the land consists of pasture and grassland.
Montenegro became a member of theUNInternational Fund for Agricultural Development(IFAD) in 2015, which notes that the rural population represents one-third of the total. In 2019 the IFAD focused its activities "on the key challenges of better connectivity and higher productivity by (i) fostering the graduation of micro and small agricultural holdings from the current non-viable subsistence-type agriculture toward semi-commercial and commercial agriculture, through investments in pro-poor rural infrastructure, (ii) promoting the aggregation of smallholders within inclusive value chain clusters and (iii) supporting the proactive role of municipalities to deploy investment to promote inclusion for entire sectors of the rural population."
Over the years 2009 to 2019 theWorld Bankcontributed a development project called theMontenegro Institutional Development and Agriculture Strengthening Project, by which (amongst other highlights) thefood safety systemwas upgraded in EU compliant manners, a Border Inspection Post withveterinaryandphyto-sanitary controlswas established in thePort of Bar, an electronic farm register was created, procedures for the classification of farm and food  establishments were completed according to EU norms, and the Veterinary Diagnostic Laboratory inPodgoricawas accredited inISO 17025analysis methods.
Montenegro has free trade agreements with many countries, but not Russia or Belarus.
After years with a minimum wage of €288.10 per month, there was a small increase in 2019 to €331.30 before 2022 saw a jump to €532.50, €6,390 p.a.
VAT standard rate is 21% in 2022, with some items at 7% and is in line with EU guidelines.
From 2023, a tax rate of 9% is applied to personal gross income above €700 per month, and a tax rate of 15% for income above €1,000 per month. Montenegrin municipalities also apply an income tax surcharge equivalent to 13-15% of the national tax rate. Social security costs are 15.5%, 6% being borne by the employee.