April 5 (SeeNews) - The World Bank said it expects Montenegro's economic growth to slow down to 2.9% in 2019 and 2.4% in 2020 as private investment levels off after the strong rise in 2018 and the large public infrastructure investment projects gradually phase out.
After a moderation in 2019, due to the fiscal consolidation and the implementation of the public administration staff reduction plan, private consumption and employment growth are expected to rebound in 2020, the World Bank said in an Economic Update for Europe and Central Asia.
Montenegro's economy expanded by 4.4% in 2018, according to the World Bank's estimate.
Inflation is projected at 1.9% over the medium term due to increasing excises and the announced electricity prices increase, the lender said.
"Current imbalances are expected to slowly moderate as investment-dependent infrastructure projects phase out."
Apart from external factors, domestic risks are increasing due to increasing political uncertainty ahead of the elections in 2020, further cost overruns of a major motorway project, and the vulnerability of some smaller banks, the World Bank said.
"Mitigating these risks requires a firm commitment to the fiscal consolidation plan and an acceleration in implementing critical structural reforms in the labor market, social sectors, and the public administration."
Moreover, Montenegro needs to strengthen public institutions that enforce fair market competition to ensure that nobody benefits from special treatment and entrepreneurs are encouraged to compete by innovating, according to the World Bank.
Subject to improvements in private sector employment and earnings, poverty is expected to decline to an estimated 4.7% in 2019 as the fiscal consolidation phases out.