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Montenegro
Successful Story
Igor Luksic, PhD
Minister of Finance
Montenegro Today
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Land area:
Coast line
Population:
Capital city:
National currency:
Visa regime
Sunny days in a year
Climate:
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Ethnic composition:
Montenegrins
Serbs
Bosnians
Albanians
Muslims
Other
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Political system
Parliamentary Democracy
13,812 km2
293 km
620,145
Podgorica
Euro
None
180
Continental,
Mediterranean and
Mountain
43%
32%
8%
5%
4%
8%
Stabile Political Environment
• Independency gained on May 21, 2006
• Ruling Democratic Party of Socialists is
dominant political party since 1991
• Parliamentary elections held on March 29,
2009
• Democratic coalition DPS – SDP regained
majority votes
Process of Integration
• EU integration
• NATO membership
• Final phase WTO accession negotiations
Standard & Poor’s Credit Rating
Since March 2007 – BB+
Economic Reforms
- Basic elements of concept •
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Openness
Monetary stability - euro as a legal tender
Low level of business regulation
Low level of taxation (CIT-9%; PIT-12%)
Free regime of capital flows
New property scheme
85% of the economy privatized (cont. in 2009)
Achievements
• Fastest GDP growth in the region
• Average growth rate in last three years – 9%
6000
5000
4000
GDP (mln)
3000
GDP per capita
2000
1000
0
2003
2004
2005
2006
2007
2008
Achievements (1)
• Montenegro is the leader in Europe according to level of FDI
1200
45
35
800
600
40
39,69
1000
26,78
29,97
20,66
400
30
25
Net FDI (mln)
20
Net FDI (% GDP)
15
10
200
5
0
0
2005
2006
2007
2008
Achievements (2)
• Euro – legal tender
9
8
7
6
5
Inflation
4
3
2
1
0
2003
2004
2005
2006
2007
2008
Achievements (3)
• Significant decrease of unemployment rate
40
35
33
30
28
25
20
Unemployment rate
18
15
15
12
10
10,8
5
0
2003
2004
2005
2006
2007
2008
Achievements (4)
• Budget surplus for three years continuously
6,2
7
6
5
3,7
4
3
1,7
2
1
0
-1
-1,6
-2
2005
2006
2007
2008
Budgetary
deficit/surplus
Achievements (5)
• Low level of public debt
45
40
42,6
35
32,6
30
27,5
25
27,8
20
External public debt (% GDP)
Total public debt (% GDP)
15
10
5
0
2005
2006
2007
2008
Global Crises
GDP Growth Projections For The Region
2009
2010
Albania
0.4
2.0
Bosnia and Herzegovina
(Program negotiations with the IMF underway)
-3.0
0.5
Bulgaria
-2.0
-1.0
Croatia
-3.5
0.3
Macedonia
-2.0
1.0
Montenegro
-2.7
-2.0
Romania
(Program negotiations with the IMF concluded)
-4.1
0.0
Serbia
(Program with the IMF)
-2.0
0.0
Slovenia
-2.7
1.4
Response to Global Financial Crises
• Prevention measure
– Law on measures for protecting of banking system
• Guaranteed all deposits up to full amount
• Credit support for banks
• Guarantees for banks
• Recapitalization of banks
Response to Global Financial Crises (1)
• Through the proposed budget for the 2009,
package of economic policy measures are
adopted that go in the direction of preserving
macroeconomic stability, increase productivity
and maintain a favorable economic
environment
Response to Global Financial Crises (2)
Countercyclical measures:
– Strengthening the investment in infrastructure
– Increasing of support to the development of the
private sector
– Increasing of the capital expenditures in the budget
– Reducing the current, unproductive budget spending,
which creates space for the support of citizens and
the economy
– Socio - economic measures (support enterprises and
active employment)
Response to Global Financial Crises (3)
• In the last quarter of 2008 three mid term (2009 - 2011)
macro fiscal scenarios were prepared
– Optimistic – growth rates respectively
– Realistic – growth rates
– Pessimistic – growth rates
• In the first quarter of 2009 these scenarios have been
revised and other scenarios have been considered with
growth rates of 0% and -2.5% for 2009
Response to Global Financial Crises (4)
• EIB and KFW support for SME’s through
credit lines to Montenegrin banks
• State guarantees
Potential Buffers
• Potential arrangement with the IMF
• Financial support from EU funds
• Other funds from the World Bank
Challenges
• Sound and consistent fiscal policy despite the
impact of global financial crises
– Stay in a line with Maastricht criteria
– Redirection from current to capital expenditures
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Privatization
Recapitalization of state own utility companies
Restructuring inefficient state own companies
Business barriers reduction
Labor market deregulation
Infrastructure investments – highways, wastewater
and reconstruction of water supply system
Main Challenge
How to benefit from crises – chance to
run necessary reforms
Thank you!
Ministry of Finance of Montenegro
Stanka Dragojevica 2
81000 Podgorica
Montenegro
e-mail: [email protected]
web: www.ministartsvo-finansija.vlada.cg.yu