Montenegro and Kosovo Country Risk Report Q2 2016
Core Views
Kosovo will remain mired in political and social instability despiteattempts by the West to defuse the situation, most recently in the EUParliament's resolution on Kosovo in early February 2016. AlthoughKosovo and Serbia reached an agreement in August 2015 overmajor issues that divide them, we expect deep seated nationalistsentiment on both sides to continue obstructing the implementationof the deal for the foreseeable future.
The ongoing political crisis in Kosovo will be the biggest impedimentto growth in 2016, and has prompted us to revise down ourreal GDP growth forecast to 2.4%, from 3.0% previously. Politicalgridlock will delay the implementation of Kosovo's deal with the IMF,putting on hold planned wage cuts and austerity measures, givingthe household sector a temporary respite.
Core Views
Montenegro's macroeconomic growth outlook for 2016 remainssubdued, due to political instability, diminished tourist arrivals fromRussia and lower production and prices for aluminium, its maincommodity export. We forecast real GDP to expand by 2.8% in2016, from an estimated 1.9% in 2015.
While the vote of no confidence to oust Montenegro's PrimeMinister Milo Djukanovic in January 2016 was unsuccessful, weexpect political instability to rise in the coming months, with a snapballot becoming a prominent possibility ahead of the scheduledparliamentary election in the fall of 2016.
- Executive Summary – Kosovo
- Core Views
- Key Risks
- Chapter 1.1: Economic Outlook – Kosovo
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Political Gridlock Weighing On Growth
- The ongoing political crisis in Kosovo will be the biggest impediment to growth in 2016, and has prompted us to revise down our real
- GDP growth forecast to 2.4%, from 3.0% previously.
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: PUBLIC CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Chapter 1.2: 10-year Forecast – Kosovo
- The Kosovan Economy To 2025
- Economy To Remain Least Developed In Region
- Kosovo's economy will remain the least developed in the Western Balkan region through to 2025, as underdeveloped road and energy
- infrastructure act as a clear check on growth potential over the long term.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 1.3: Political Outlook – Kosovo
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- EU Resolution Of Little Help To Kosovo
- Kosovo will remain mired in political and social instability despite attempts by the West to defuse the situation, most recently in the EU
- Parliament's resolution on Kosovo in early February, 2016.
- Long-Term Political Outlook
- Political Future Far From Certain Despite Serb Agreement
- Kosovo's long-term political future is far from assured, with a host of structural economic inefficiencies, weak institutions and societal
- schisms weighing on the country's outlook through to 2025.
- Executive Summary – Montenegro
- Core Views
- Key Risks
- Chapter 2.1: Economic Outlook – Montenegro
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Headwinds To Growth On Both Domestic And External Front
- Montenegro's macroeconomic growth outlook for 2016 remains subdued, due to political instability, diminished tourist arrivals from
- Russia and lower production and prices for aluminium, its main commodity export.
- TABLE: GDP GROWTH FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- GDP By Expenditure Outlook
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Chapter 2.2: 10-Year Forecast – Montenegro
- The Montenegrin Economy To 2025
- BE Reforms Crucial For Convergence
- We hold a relatively bullish outlook on Montenegro's long-term convergence prospects, and forecast real GDP to expand by an average
- of 3.2% between 2016 and 2025.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 2.3: Political Outlook – Montenegro
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Lack Of Political Consensus On NATO Membership To Stoke Instability
- While the vote of no confidence to oust Montenegro's Prime Minister Milo Djukanovic in January 2016 was unsuccessful, we
- expect political instability to rise in the coming months, with a snap ballot becoming a prominent possibility ahead of the scheduled
- parliamentary election in the fall of 2016.
- Long-Term Political Outlook
- Converging Towards The EU
- Over our forecast period to 2025, we expect Montenegro to experience a sanguine domestic policy environment while gradually
- converging with Western European norms and gaining eventual entry into the EU.
- Chapter 2.4: Operational Risk – Montenegro
- SWOT Analysis
- BMI Operational Risk Index
- Operational Risk
- TABLE: SOUTH EAST EUROPE – LABOUR MARKET RISK
- TABLE: SOUTH EAST EUROPE – LOGISTICS RISK
- TABLE: SOUTH EAST EUROPE – CRIME AND SECURITY RISK
- TABLE: SOUTH EAST EUROPE – TRADE AND INVESTMENT RISK
- TABLE: MAIN IMPORT PRODUCTS, 2014
- Chapter 3: Regional Outlook
- Regional Outlook
- Balkans To Face Rising Instability In 2016
- The Balkans faces the risk of greater instability and unrest in 2016, as a result of separatist sentiment in Bosnia-Herzegovina's Serb
- entity, ongoing tensions between Serbs and Kosovars in northern Kosovo, the spectre of Islamic State gaining a foothold in the region,
- and an early election in Macedonia.
- TABLE: SOUTH EASTERN EUROPE – CORRUPTION PERCEPTIONS INDEX
- Chapter 4: BMI Global Macro Outlook
- Global Macro Outlook
- Downside Risks Gather Momentum
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
- TABLE: KOSOVO – MACROECONOMIC DATA & FORECASTS
- TABLE: MONTENEGRO – MACROECONOMIC DATA & FORECASTS
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