May 10 (SeeNews) - The World Bank said it has affirmed Montenegro's economic growth at 2.8% in 2018 on the back of public investments and personal consumption.
Montenegro's growth will slow to 2.5% in 2019 and 2.1% a year later, as the construction of a key highway connecting the Adriatic Port of Bar to the border with Serbia approaches completion, the World Bank said in its Macro Poverty Outlook for Europe and Central Asia. The Bar-Boljare motorway is part of pan-European Corridor XI, a ferry/motorway corridor linking Italy's Bari to Romania's Bucharest.
Inflation is projected at 2.5% in the 2018-2019 period, as the VAT rate rise adds to the current inflation growth in 2018, the lender noted.
It added that the fiscal deficit is projected to be brought down to 3.2% in 2018, before the country slowly turns to surplus by 2020.
The World Bank said Montenegro's poverty is expected to slightly increase as mothers’ benefits phase out, but is likely to resume its decline in 2019-2020 to an estimated 4.4% by 2020.
The positive economic outlook faces high, but moderating risks, the lender commented. As the construction of the Bar-Boljare highway is completed in 2019, growth will slow unless productivity gains and new private sector investments realise.
Large fiscal deficit and growing public debt call for the decisive implementation of the recently adopted fiscal consolidation program, the bank warned. It added that the fiscal framework that aims to have a balanced budget by 2019, from over 5% deficit in 2017, will require credible spending consolidation in wage bill, social transfers, and operational costs to put public deficit and debt on a sustainable trajectory.
Montenegro's economic growth hit a high 4.3% in 2017, due to surge in investment led by the highway construction and a historically strong tourism season.