Unfavourable economic trends
Overview:
Montenegro enjoyed exceptional growth between 2006 and 2008 but is now undergoing a deep economic recession. Unlike many other countries in the region, the economy has yet to show signs of a turnaround and may struggle to record positive economic growth at all this year. Inflation is low and the massive current account deficit has halved. FDI flows have remained strong despite the global economic recession helping to rebuild foreign exchange reserves from dangerously low levels. However, the authorities face two significant challenges. First, the fiscal deficit must be kept low to maintain ease of financing and stabilise the debt to GDP ratio. Second, rising unit labour costs and the depreciation of other currencies in the region against the Euro pose significant challenges to medium-term competitiveness.