PODGORICA (Montenegro), May 3 (SeeNews) – The European Commission said on Tuesday it expects that Montenegro will post economic growth of 3.6% in 2016 and 3.9% in 2017, slightly lower than projected earlier.
The Commission's previous forecast was that Montenegro's economy will expand by 4.0% in 2016 and by 4.1% next year.
Tourism and capital-intensive projects continue to be the main drivers of Montenegrin growth, although their contribution appears more volatile than previously expected, the European Commission said in its 2016 Spring Forecast report. Growth potential is also hampered by the sluggish recovery of bank lending, it added.
Private consumption is seen to recover to 1.9% in 2016 and 2.1% in 2017, from 0.7% last year, on the back of recent increases in pensions, public sector wages and social transfers.
The EU, however, slightly revised downward the country's inflation forecast for 2016 and 2017 as a results of low commodity prices and the still weak private consumption. It projects that Montenegro's CPI to reach 1.5% in 2016 and 2% in 2017, down from 2.3% and 2.2%, respectively, forecast earlier.
In terms of public finances, the Commission said that highway related expenditures and borrowing took a toll on the country's economy in 2015, swelling the general government deficit to above 8% of the GDP. Under a no policy change assumption, it projects a narrowing of the country's fiscal deficits over the next two years, due to the growth effect and the contention of expenditure on real terms.
The Commission cautioned that the political situation in the electoral year could delay the reforms necessary to stabilize public finances.
In 2015 Montenegro's GDP growth accelerated to 3.2% from 1.8% a year earlier.