May 8 (SeeNews) - The European Bank for Reconstruction and Development (EBRD) said on Wednesday it is downgrading its projection for Montenegro's economic growth this year to 2.8% from 3.0% predicted in November.
"With the completion of large investment projects and ongoing fiscal consolidation, growth [in Montenegro] is expected to moderate significantly, to 2.8% in 2019 and 2.6% in 2020," the bank said in its May 2019 Regional Economic Prospects report. "The risks to the projections are on the downside and mainly relate to weaker growth in the EU, possible further motorway cost overruns and domestic political uncertainty."
The EBRD noted that better public finance management, the labour market and public administration reform together with stronger economic institutions could mitigate those risks.
Montenegro's gross domestic product (GDP) increased by 4.9% last year, quickening from 4.7% in 2017.
"Growth in 2018 surprised on the upside. The economy expanded by close to 5%, on the back of the highway construction, some flagship real estate projects at the coast, an exceptionally strong tourist season and a further rise in private consumption, the EBRD noted.
Montenegro and Serbia were the fastest growing economies in the Western Balkans region in 2018, with both countries enjoying strong investment flows, the bank said in a press release, presenting its latest economic forecasts at the meeting in Sarajevo.
The lowering of the forecast on Monetenegro mirrors the EBRD's expectations for further moderation of economic growth in the entire region of Southeast Europe (SEE), which is now seen at 3.0% in 2019, down from 3.2% forecast previously, following a slowdown to 3.4% in 2018 from 4.3% in 2017. Growth in 2020 is also projected at 3.0% in the report.
"Each country in the region has its own challenges [...] The biggest challenge globally is the US-China trade war," the EBRD’s chief economist, Sergei Guriev, told SeeNews on the sidelines of the bank's annual meeting in Sarajevo, Bosnia.
"Our countries are not directly affected, but they are affected indirectly. If the Chinese economy goes down, the German economy goes down, and our countries are very much dependent on German and Western economies," Guriev said.