PODGORICA (Montenegro), March 8 (SeeNews) – Montenegro’s economy is expected to expand by a real 4.6% in 2016, following a revised estimated growth of 4.1% in 2015, as the country remains reliant on large infrastructure projects and vulnerable to fluctuations in external demand, the International Monetary Fund (IMF) said on Tuesday.
Montenegro’s economy rebounded last year, and strong growth is set to continue after the medium-term outlook was boosted by the construction of the Bar-Boljare highway, the IMF said in a statement after it concluded an Article IV consultation with the Southeast European country.
However, the heavy reliance on large infrastructure projects to support economy growth also poses risks to fiscal and external sustainability, the IMF noted. Montenegro also remains vulnerable to fluctuations in external demand and global financial conditions, it added.
The 169 km Bar-Boljare motorway is part of the longer Bar-Belgrade stretch of Pan European Transport Corridor X, which will link Montenegro's Adriatic coast with the Serbian capital.
"Even with relatively high growth, staff projects deficits of around 8% of GDP over the next three years, contributing to substantial financing needs," the fund said.
During that time, gross public debt is expected to reach 80% of GDP, from 66% in 2015, the IMF said, and called for its reduction to 60% of GDP over the medium term.
The fund warned the Montengrin government that new pension provisions and social allowances, planned public wage hikes, and strategic tax incentives would cause pressure to the state budget.
Montenegro's financial system is stable, and that bank capitalization and liquidity appear adequate, although still high level of non-performing loans, low provisioning and weak asset quality remain areas of vulnerability, it noted.
According to IMF estimates, Montenegro's inflation stood unchanged at 1.4% in 2015, whereas industrial production rose 13.7%.