May 24 (SeeNews) - The Council of the European Union said Montenegro's economic growth will remain moderate due to the strong negative contribution of investment-related imports and the need for fiscal tightening, as already high public debt ratio is forecast to grow further.
A sound medium-term fiscal consolidation strategy is needed to put public finances on a sustainable path, also in view of large refinancing needs in 2019 and 2020 that exacerbate vulnerabilities related to potential shifts in investors' sentiment, the Council of the European Union said on Tuesday in a statement on the joint conclusions of the economic and financial dialogue between the EU and the Western Balkans and Turkey.
The submitted 2017 economic reform programmes of the Western Balkans and Turkey cover the period 2017-2019.
The Council advised Montenegro to fully implement the 2017 consolidation package, and take additional fiscal measures if necessary to achieve the envisaged budget savings of around 3% of gross domestic product (GDP), adopting a comprehensive medium-term fiscal strategy with concrete revenue and expenditure measures with sustainable effects in order to stabilise public debt and reduce debt-related vulnerabilities.
Montenegro was also invited to ensure the availability of adequate financial resources for the implementation of new legislative measures, strengthen tax revenues, review tax exemptions and adopt measures to facilitate debt servicing by tapping the local debt markets, extending maturities, and advancing the privatisation agenda.
The country should continue efforts to foster non-performing loan (NPL) resolution by developing a comprehensive strategy to that end, including participation by all relevant stakeholders, with the aim of reducing credit risks in the banking sector and removing impediments to credit extension in the economy, the Council of the EU noted.
Moreover, Montenegro should harmonise national rules with the EU cost reduction measures directive for the development of high-speed electronic communication networks, ensure effective, efficient and independent rail regulatory and safety authorities to implement the full opening of the rail market.
Other recommendations include the strengthening of the financial and non-financial support services for small and medium-sized enterprises (SMEs), reform the law on social protection to ensure cost-effectiveness, better targeting of assistance and the reduction of disincentives for women to work.
Earlier this month, the European Commission said it has lowered its forecast for Montenegro's economic growth in 2017 to 3.3% from 3.7% projected in February, due to the negative contribution of investment-related imports. Gross domestic product (GDP) is expected to grow by 3.5% in 2018, the Commission said in its Spring 2017 Economic Forecast report.