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Erste sees Montenegro's economic growth slowing in 2018, 2019

Author Maja Garaca
Erste sees Montenegro's economic growth slowing in 2018, 2019 License: Creative Commons BY-NC 2.0

PODGORICA (Montenegro), April 16 (SeeNews) - Erste Group said it expects Montenegro's GDP growth to slow to 3.2% this year, from a preliminary increase of 4.4% last year, before slowing further to 2.9% in 2019.

Montenegro's economic growth was supported by strong investment dynamics and a stable consumption footprint in 2017 but with the completion of a major highway project growth is expected to be somewhat weaker, Erste Group said in a macroeconomic outlook on the country published last week.

However, overall investment activity is expected to stay dynamic, with most investors focused on infrastructure, energy and tourism projects, Erste said.

Private consumption should be supported by rising wages in the private sector, stable inflation, remittances and tourism inflows, as well as more stable labor market developments, but the growth could be more modest, given the rise in the tax burden and reduction of the public wage bill.

Montenegro's consumer price inflation accelerated in 2017 to 2.4%, mostly reflecting the results of excise increases. In 2018, Erste expect additional acceleration of inflation close to 3% y/y, due to a VAT hike from January.

The country's jobless rate is expected to fall to 15.8% in 2018, from 16.4% last year, and drop further to 15.2% in 2019.

The general government budget deficit is predicted to fall to 3.5%, from 5.7% in 2017. The government is expected to end 2019 with a slim deficit of 1.0%. 

Montenegro's public debt is also expected to drop to 63.2% of GDP this year, from 65.1% last year, and decrease further to 57.6% in 2019.