Intellinews - Montenegro Country Report - April 2012

Additional Information

Rising fiscal imbalances in the country may lead to budget revision in the mid-term. Despite commitment to prudent fiscal policy, the budget gap reached 1.6% of the projected GDP in the first two months of the year. The cumulative gap expanded due to EUR 39.6mn deficit reported in Feb alone. Furthermore, negative developments in the eurozone countries, coupled with harsh weather conditions in the first months of the year and activation of state loan guarantees (related to KAP's debt) have made it rather certain that the projected by the government narrowing of the budget gap to 1.05% of GDP in 2012, from 4% in 2011, needs to be revised. Surging public debt – by 22.4% y/y to EUR 1,540.3mn or 45.2% of GDP in February 2012 (compared to 38.4% of GDP a year earlier) presents additional concerns.

At the same time, the effects from the vulnerable external environment on the tiny country’s economy are increasingly seen through plunging net FDI (57.4% y/y to EUR 33.3mn in Jan-Feb), declining exports (by 25% y/y in Feb) and expanding trade gap.