April 11 (SeeNews) - The World Bank said it expects Montenegro's economy to grow by 3.6% this year, decreasing the forecast it made in October.
Next year, Montenegro's economic growth is expected to accelerate to 4.7%, the World Bank said in Europe and Central Asia Economic Update, Spring 2022 report published on Sunday.
"The outlook is fragile in an environment of increasing uncertainties. The outbreak of the war in Ukraine and the associated developments have significantly worsened the outlook for Montenegro, reducing the gross domestic product (GDP) growth rate to 3.6% in 2022," the World Bank said.
In October, the World Bank projected that Montenegro’s economy will grow by 5.6% in 2022.
"The main direct transmission channel of the war to Montenegro’s economy is tourism. The expected decline in tourism due to the war slows down exports and private consumption, which is expected to remain strong, however, due to the positive effects of higher disposable incomes and the employment recovery," the World Bank said in the report.
Rising energy and food prices will disproportionately hurt the poor, as poverty in 2022 is projected at 15.6%, though the outlook is uncertain depending on the economic impacts of the conflict.
"The global inflationary pressures and, to a lesser extent, domestic pressures from an increase in wages will push inflation to an estimated 5% in 2022. Utmost fiscal prudence is needed to return public debt towards Montenegro's fiscal rule of 60% of GDP," the World Bank noted.
The Western Balkans region comprising Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro, and Serbia, will record economic growth of 3.2% in 2022, the World Bank said. Growth in the region is projected at 3.1% in 2023.