Montenegro Country Report - February, 2016

Montenegro Country Report - February, 2016

This report covers the key macroeconomic and financial releases as well as the political events from Montenegro for the period of February 6-March 5, 2016.
Nato’s secretary general Jens Stoltenberg said that Montenegro should continue making reforms, focusing on corruption and rule of law, in order to join the alliance. Nato launched on February 15 two-day accession talks with Montenegro after inviting the country to join the alliance in early December.
Montenegrin political parties failed to reach an acceptable consensus on the participation of the opposition in the government as the Prime Minister, Milo Djukanovic, refused the requests for more control over the state broadcaster RTCG and the parliamentary leadership. The European Union has called on the political leaders to resume the talks.
Montenegro’s government has decided to introduce property confiscation in cases of unpaid taxes.


Key points:

The budget deficit shrank 5.9% y/y to 21.3mn in January
The number of foreign tourists visiting Montenegro increased by 4.3% y/y to 14,701 in January
ndustrial output declined 12.3% y/y in January


EXECUTIVE SUMMARY 3
REAL SECTOR 4
1. GDP 4
Montenegro’s GDP to rise 4.0% in 2016 – EBRD 4
2. Inflation 4
Montenegro's PPI inflation ticks up 0.1% y/y in January 4
Montenegro’s CPI inflation cools to 0.8% y/y in January 5
3. Industry and Trade 5
Montenegro’s industrial output eases annual contraction in January 5
Montenegro's industrial sales fall 20.8% y/y in January 5
Montenegro's retail sales growth slows further in January 6
4. Labour Market 6
Montenegro’s unemployment rate rises to 17.85% as of February 8 – employment agency 6
Montenegro’s monthly average net wage up 1.7% y/y in January 7
5. Tourism 7
Foreign tourist arrivals to Montenegro rise 4.3% y/y in January 7
FISCAL SECTOR 8
Outstanding debt of Montenegrin municipalities at €102.84mn at end-September 2015 8
Montenegro’s govt introduces property confiscation for unpaid taxes 8
Montenegro hopes to raise €912mn from taxes in 2016 9
Montenegro’s customs revenue at €29.38mn in January 9
Montenegro to rebalance budget in H2, finance ministry says 9
Montenegro’s January budget gap contracts 5.9% y/y 10
Montenegro hikes pensions by up to 20% as of July 1 10
Montenegro sells €300m Eurobond at 6% yield 10
FINANCIAL INTERMEDIATION 12
Montenegrin banks’ liquidity spikes 33.6% y/y in November 2015 – c-bank 12
Montenegro’s c-bank gives licence to Azmont Banka 12
Mandatory reserves of Montenegrin banks rise 15.9% y/y to €249.1mn at end-December 13
Montenegro’s NPL ratio falls to 12.5% in December, c-bank says 13
Average lending interest rate in Montenegro falls to 7.76% in January 14
Montenegro’s bank deposits growth slows to 12.8% y/y in January 14
EXTERNAL SECTOR 14
Montenegro’s end-September state debt at €2.15bn 14
Montenegro’s trade gap widens 11.9% 15
STRUCTURAL REFORMS AND CORPORATE NEWS 15
Stratex, Turkey’s Dogus to jointly expand Montenegrin marina project 15
Montenegro Airlines to get €2.2mn state aid 16
Montenegro’s KAP replaces power monopoly EPCG with Slovak LE Trading for power supplies 16
China, Turkey interested in Montenegro’s €530mn Moraca HPP project 16
Montenegro’s CGES to invest €50mn in network upgrade in 2016 17
POLITICS 17
Nato’s Stoltenberg urges Montenegro to continue reforms, fight corruption 17
Russian deputy PM Rogozin banned from entering Montenegro 18
Nato launches accession talks with Montenegro 19
Montenegro’s parliament approves interior minister’s dismissal 19
One Montenegrin in nine signs petition calling for Nato referendum 19
Montenegrin parties fail to agree on opposition’s joining govt 20
Montenegro’s ruling DPS, opposition parties seek replacement of parliament speaker 21
EU calls Montenegrin political parties to resume talks on opposition’s entry in government 22
Montenegro’s police, prosecutors at loggerheads over officer arrests 22
Montenegro’s opposition to file no-confidence motion against government

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