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Montenegro Country Report - October, 2016

Montenegro Country Report - October, 2016
This report covers the main macroeconomic releases from October 1 until October 30, 2016 as well as the financial and political events that took place in Montenegro during this period.
The political parties that will form Montenegro's new ruling coalition are expected to complete negotiations within two days, according to Dusko Markovic, who is the Democratic Party of Socialists' (DPS) candidate for the country's new prime minister. Markovic was nominated after the DPS gained the highest number of votes in the October 16 general election.
Meanwhile political analysts have forecast that Montenegro’s veteran Prime Minister Milo Djukanovic, who has backed off from leading a new government after the October 16 general election, will most likely run for president in 2018.
Serbian special police have found proof that Serbian citizens were planning a coup in Montenegro, Serbia’s Prime Minister Aleksandar Vucic said. He told a press conference that the security services had found proof of planned illegal activities in Montenegro that had been prepared in Serbia.
Montenegro's economy is expected to post the highest growth, of 5.1%, among the countries in Emerging and Developing Europe this year, the International Monetary Fund (IMF) said in the October issue of its World Economic Outlook (WEO). The forecast was revised upwards compared to the 4.7% projected in the April WEO.

Key points:
CPI deflation softened to 0.1% y/y in September
The working-day adjusted industrial production increased 4.4% y/y in September
The foreign trade gap widened by 18.7% y/y to €1.32bn in the first nine months of 2016


1. EXECUTIVE SUMMARY 4
2. POLITICS 5
Montenegro’s new government to be agreed in two days, PM nominee Markovic says 5
Djukanovic likely to run for Montenegrin presidency in 2018 5
Montenegro’s DPS nominates Dusko Markovic for new PM 7
Serbia finds proof of coup attempt in Montenegro 9
Preliminary results confirm election victory for Montenegro’s ruling DPS 10
Montenegro’s interior ministry secretary signs electoral roll 11
3. MACROECONOMIC OVERVIEW 12
Montenegro to post highest GDP growth in emerging Europe in 2016, IMF says 12
4. REAL SECTOR 13
4.1. GDP, forecasts 13
Montenegro’s GDP growth speeds up to 2.7% y/y in second quarter 13
4.2. Inflation 13
Montenegro’s HICP turns to growth in September 13
Montenegro’s consumer price deflation softens to 0.1% y/y in September 14
Montenegro's PPI deepens annual fall in September 15
4.3. Industry and trade 15
4.3.1. Industrial production 15
Montenegro’s industrial output slows growth in September 15
Montenegro's industrial sales plunge in September 16
4.4. Labour and retail 16
4.4.1. Unemployment and wages 17
Montenegro’s monthly average net wage grows 5% y/y in September 17
Montenegro’s unemployment rate rises to 18.29% 17
4.4.2. Retail 18
Montenegro's retail sales grow by 2.9% y/y in August 18
5. EXTERNAL SECTOR AND TRADE 19
5.1. Balance of payments 19
Montenegro’s H1 current account gap widens 35.7% y/y to €661.6mn 19
5.2. Trade 19
Montenegro’s 9-mo trade gap widens 18.7% y/y 19
5.3. Foreign direct investment (FDI) 20
Montenegro’s net FDI down 46.1% in January-July 20
5.4. External debt 20
Montenegro’s public debt reaches 60.6% of GDP at end-June 20
6. PUBLIC SECTOR 21
6.1. Budget 21
Montenegro’s 8-mo budget gap sinks 86% y/y to €33.6mn 21
7. FINANCIAL SECTOR AND CAPITAL MARKETS 22
7.1. Banking system 22
Average lending interest rate in Montenegro falls to 7.61% in September 22
Montenegro’s bank deposits growth accelerates to 8.8% y/y in September 22
Montenegro’s bank assets growth accelerates to 7.2% y/y in September 23
Montenegro’s banks expected to lower interests on loans next year 24
Montenegro’s NPL ratio falls to 11.4% in August 24
Mandatory reserves of Montenegrin banks rise 11.2% y/y to €262.6mn at end-August 25
7.2. Stock market 25
Montenegro Stock Exchange turnover rises 50.7% y/y in September 25
7.3. Credit ratings 26
Moody’s downgrades Montenegro’s rating to B1 on negative outlook, S&P revises outlook to negative 26
8. MAJOR CORPORATE NEWS 27
Czech Skoda Praha to find alternative financing for new power plant construction in Montenegro 27
China’s CRBC wants to build second stretch of Bar-Boljare motorway in Montenegro 28
Krnovo wind farm in Montenegro to start operations in early 2017 29

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