November 10 (SeeNews) - Erste Group has downgraded its forecast for the economic output of Montenegro and now expects the country's gross domestic product (GDP) to decline by 15% in 2020, versus a 10% contraction projected earlier, it said on Tuesday.
Any recovery is likely to be limited by the negative carryover from 2020 and projected only partial recovery of tourism and will be capped at 7.5% in 2021, Erste Group said in a statement.
"Hopes for a swift V-shaped recovery seem to have evaporated, with all indicators pointing towards an 'L' shape. The retail trade decline deepened in the summer months (-30.6% average y/y in 3Q), reflecting the tourism slump, while the goods export decline remains practically unchanged in negative territory (-19.7% y/y average in 3Q). Industrial production eased the downturn compared to 2Q, but remained in negative territory in 3Q as well (-2.8% on average y/y)," Erste said.
COVID-19's impact on public finances is twofold, as the revenue side reflects the loss of the tourism season, while the expenditure side swelled due to measures implemented to support the economy.
"After 9M20, central government revenues are down 12.9% y/y, while the expenditure side is up 8.9% y/y, resulting in a budget deficit of roughly 7.9% of GDP," Erste Group noted.
Montenegro's general government deficit is expected to stand at 10.7% of gross domestic product (GDP), with pressure predominantly coming from a reduction in fiscal revenue.
Erste Group's outlook on the main economic indicators of Montenegro (pct change):
|
2020 |
2021 |
2022 |
Real GDP (growth y/y %) |
-15.0 |
7.5 |
4.0 |
Public debt (% of GDP) |
100.2 |
97.8 |
95.3 |
Current account balance (% of GDP) |
-22.2 |
-18.7 |
-17.2 |
Unemployment (%) |
17.0 |
17.0 |
16.3 |