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Erste lifts Montenegro's 2019 economic growth forecast to 3.3%

Author Radomir Ralev
Erste lifts Montenegro's 2019 economic growth forecast to 3.3% License: Creative Commons BY-NC 2.0

PODGORICA (Montenegro), December 2 (SeeNews) - Erste Group has increased its forecast for Montenegro's economic growth in 2019 to 3.3% from 3.1% envisaged earlier, due to better than expected external developments, it said.

Erste has maintained its 3.3% gross domestic product (GDP) growth forecast for 2020, as the projected weaker investment contribution will be offset by stable private and public consumption trends and improving external component, Erste Group said in a macroeconomic outlook on the country published on Friday.

"Private consumption should benefit from expected higher net wages next year, given announcements that the government will abolish the ‘crisis’ tax on above-average wages, introduced back in 2013," Erste said.

The country will benefit from supply-side effects from the construction of the Bar-Boljare motorway once the project is completed, while the tourism and energy sectors will remain key buffers of growth, the bank noted.

"Meanwhile, overall risks are still tilted to the downside, as stronger global economic slowdown could have a substantial negative effect on tourism revenues and thus again put heavy pressure on net export contribution."

Erste expects 0.3% inflation in 2019, down from 2.6% last year, due to the high base effect from a value-added tax (VAT) hike in January 2018.

The country's jobless rate is expected to fall to 14.6% in 2019, from 15.2% last year, and drop further to 14.3% in 2019, while the general government budget deficit is predicted to fall to 2.0% of GDP, from 3.4% in 2018. The government is expected to end 2020 with a slim deficit of 0.5%.

Montenegro's public debt is expected to rise to 78.3% of GDP in 2019, from 70.1% last year, and to fall to 70.5% in 2020.