May 6 (SeeNews) - The European Commission said on Wednesday it expects Montenegro's economy to contract by 5.9% in 2020 due to the negative effects of the coronavirus outbreak, it said.
"Montenegro’s economy is strongly dependent on tourism, a key source of gross domestic product (GDP) growth, foreign exchange, employment and fiscal revenues. However, the lock-down brought tourism and travel to a standstill at a time when these activities were about to enter the high season," the EU's executive body said in its Spring 2020 Economic Forecast report.
A swift recovery of the economy in 2021, while possible, is subject to very substantial uncertainties. The main risk for this scenario would be a revitalisation of the virus and delays to obtain a vaccine before the next tourism season, the EU Commission said.
Montenegro’s labour market, characterised by strong seasonality and dependence on foreign temporary workers, could facilitate a quick adjustment of the payroll for local businesses, dampening to some extent the negative impact on unemployment, the EC noted.
In addition to the sharp decline of international oil prices, inflation pressures are set to stay low in 2020 due to the contraction of domestic demand. Some likely price increases in agro-food and medical products in 2020 could be offset by rebates in tourism packages and real estate. Some modest increase of inflation is forecast for 2021, in the wake of the projected recovery in consumption and employment, the EU Commission added.
Montenegro's main economic indicators outlook, as per Spring 2020 Economic Forecast report:
|
2019 |
2020 |
2021 |
GDP growth rate (pct change) |
3.6 |
-5.9 |
4.4 |
General government gross debt (as % of GDP) |
77.2 |
82.7 |
79.6 |
Unemployment rate (as % of total labour force) |
15.4 |
17.0 |
16.2 |