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MONTENEGRO MINISTRY OF FINANCE Sector for Economic Policy and Development MONTHLY MACROECONOMIC INDICATORS November 2011 Prepared by: Iva Radovanović Radojka Martinović Radovan Živković Stanko Jeknić, PhD Vladislav Karadžić Coordinator: Tijana Stanković, MSc KEY NOTES Alarming situation in European political and financial scene additionally deteriorates liquidity of Montenegrin economy. Tourism – the generator of growth in 2011 Remark: Macroeconomic monthly outlook is a new publication of Ministry of Finance providing macroeconomic and fiscal indicators trends on monthly level. The initiative resulted from the requirement of data and analysis users to have brief and overall outlook. Since it is a new type of publication it will be the subject to improvement through its each edition by the end of 2011, thus providing the opportunity for potential changes. Considering the fact that dynamic of MMI publishing from January 2012 is going to be by the end of the current month comprising the available data for the previous one, November edition from 2011 includes available data and indicators including October 2011, while December will be including November. 1. International Environment Graph 1 shows that measures to prevent spread of crisis in Euro zone of G-20 Cannes Summit, held at the beginning of November, did not get approval of financial markets -interest rates are increasing, except the ones referring to Germany since the demand is strong due to its status of ”safe port”. Graph 1 10 Years bond yields 7.5 Summit G20 6.5 Summit 5.5 % Deepening of the crisis in Euro zone resulted in resigning of Prime Ministers of Greece and Italy. First one due to risky proposal to conduct referendum in Greece aimed at verifying readiness of voters to accept the burden of long term painful reform as a precondition for receiving the tranche from the second bailout package, while the second one resigned due to loss of market confidence into readiness and capability to implement painful reform. The cost of Italian debt fell down to the lowest level since establishment of Euro zone, so the required rates exceeded critical limit of 7 %, which is deemed as unsustainable level. After strong buying of Italian debt by European Central bank, Italian 10-year bond yields for a short time returned to 6.5 % but then rose again and currently are 7.46 %. However, countries from AAA zone (credit rating) are coming into focus gradually: France, Austria; Finland and Netherlands. The gap between required debt yields between first two countries and German exceeded 150 points (1.5%) and there are certain doubts into their jealously kept rating. The reason of this increase is low estimated growth of French economy and high exposure of Austria to Italian debt along with debt within region of East and South-East Europe. The crisis overflows to countries of Eastern and South-east Europe. Thus the price of Slovenian debt is in downfall since the borrowing rates exceeded 7 % and there are speculations that it could be the next candidate applying for bailouts from eurozone. The reason is primary high exposure of its real and banking sector to Italian. Hungarian credit rating was decreased to „junk”. European Commission cut estimated growth rates for eurozone countries from 1.6 to 0.5 % which is certainly not encouraging signal. All this must result in negative repercussion to Balkan region and our country due to high exposure of these economies to turbulence in neighborhood in every economic sector: banking, real and sector referring to public finance. Aluminum price is currently 2002$/T, which is by KAP assumed as level not sufficient for rentable operation. Oil price is 108.6$/barrel and within last three months it ranges around 110 $/barrel. Inflation in eurozone in October reached 3 % on annual level. Italy Spain 4.5 Belgium 3.5 Austria France 2.5 Njemačka 1.5 1.6.11 1.7.11 1.8.11 4. Employment and Wages In October 2011 the unemployment rate was 11, 4%, which presents decline in comparison to October 2010 when it was 11, 7%. However, in comparison to previous month, slight growth of unemployment rate for 0,29 p.p. has been recorded. According to LRS methodology (Labor Force Survey) the unemployment rate in the second quarter of 2011 was 19,9% i.e. approximately at the same level as in the second quarter of 2010. Unemployment in October 2011 declined for 5,4%, while employment, as per September 2011 data, grew for 4,3% on annual level. Number of newly employees for January-October 2011 period was 17.789, out of which seasonal employment was 8.356 or 27,5% of total unemployed. Average gross wage in October 2011 was € 711 while average net wage was € 477 and remained the same in comparison to previous month. Average net wage in JanuaryOctober 2011 period recorded real decline for 1, 2% comparing to the same period of 2010. 1.11.11 Graph 2 Real sector -Annual percent of change- 50 40 30 20 10 0 I -10 II III IV V VI VII VIII IX X 2011 -20 Manufacturing Turist overnight Retail turnover 3. Prices Inflation measured by Consumer Price Index in October recorded the level of 3,3% presenting the downfall in comparison to the beginning of 2011. Products and services which on annual level impacted the inflation growth in October are: alcohol beverages and tobacco (25,6%), health (17,7%), transportation (10,1%), while products and services with higher participation in overall index had declining effect: food and beverage (1%), clothing and footwear (-0,8%), household and household devices (-0,9%) communications (0,9%). Monthly inflation in October was 0,2%. Producer Price Index, sharply grew in the beginning of July due to increase of production prices of food processing and base metals price, and afterwards recorded slight decline and retained the annual level of 2,8%. The highest annual growth of prices was recorded in mining sector (24%), food and beverage production (12,2%), and base metals production (4,8%). Harmonized CPI in October 2011 was 3,9%, presenting the 0,4 p.p. growth in comparison to the previous month. 1.10.11 Source :Thompson Reuters-source MF 2. Real sector Growth of tourism turnover was driving force of activities in other economic sectors. Over ten months of 2011 the growth of overnight stays was 10,2 % and arrivals 8,8%, in comparison to the same period last year, which resulted from increased number of overnight stays (12,0%) and arrivals (10,4%) by foreign tourists. In the same period the industrial production declined for 5,9%, as a consequence of energy production fall for 25,4%, while processing industry and mining grew for 8,7 and 2,0%, respectively. Recovery of basic metals production continues by growth for 18,8% over ten months in 2011. It makes 20,5% of total industrial production, i.e. 39,7 % of processing industry. Retail turnover for the first ten months is higher for 20,1% in comparison to the same period of previous year which is primarily result of tourism turnover growth. Value of executed construction works in the third quarter of 2011 is higher for 2,1% in comparison to the same quarter of 2010. 1.9.11 Graph 3 Inflation 6,0 5,0 4,0 3,0 2,0 1,0 0,0 CPI I II III IV HICP V VI 2011 Graph 4 PPI VII VIII IX X Graph 5 5. Public Finance Collection of revenues and budget expenditures has been balanced in October. Current budget revenues for the first ten months of 2011 amounted 919,94 mill € or 28,39% of estimated GDP for 2011. (3.273, 00 mill €). With reference to nine months plan, revenues are lower for 2,47 %, while in comparison to the same period of previous year, they were on slightly lower level (0,41%). Excises are expectedly higher than last year and what is important to point out is continuous satisfactory VAT collection which is still slightly lower than planned but in the same time 7,2% higher in comparison to ten months of previous year. Budget expenditures for ten months are executed by 94,70 % of plan, while in comparison to budget execution for ten months of 2010, they are higher for 4,95%. Considering the expenditure categories, the highest absolute growth in comparison to previous year, was recorded at social care transfers – about 28 mil € (growth of pension and social care contributions), while the highest percentage growth was recorded at interest rates – for ten months of current year, the interest rates have been almost doubled in comparison to previous year (over 85%). Budget deficit after ten months of current year amounted 64,09 mill € or 1,96 % of GDP. In October, deficit recorded growth for only 0,47 mill €, due to balanced revenue collection and execution of budget expenditures. Primary deficit after ten months amounted 19,35 mill €, while debt repayment reached level of 148, 45 mill € or 4,53 % of GDP. State debt after ten months of current year amounted 1448 mil € which is 44,24 % of GDP. Internal debt was 383,5 mill € (11,72 % of GDP), while foreign debt amounted 1064, 5 mill € or 32,52 % of GDP. 1000.00 900.00 2010 800.00 700.00 600.00 500.00 2011 400.00 300.00 200.00 100.00 0.00 -100.00 Expenditures Current DEFICIT revenues Graph 6 6. Monetary Sector In September 2011, trend of credit activity decline and households’ deposits growth continues. Total bank loans in September 2011 amounted 1.957,3 mill € and on annual level were lower for 6,1%, or 2,6% on monthly level. Participation of bad loans in total loans is 19,7% and is significantly decreased in comparison to previous month when it was 25,3% due to replacement of bad assets to mother banks. Out of total loans, loans to economy amounted 985,8 mill. €, and are 25,4%, lower than in the same month previous year, while households loans amounted 843,9 mil. € and are lower for 2,5% on annual level. Total deposits in September 2011 were 1.877,8 mill €, which in comparison to the same month of previous year present growth of 5,3%. Households’ deposits are 1.034,9 mill € and economy deposits declined for 16,1% amounting 499,2 mil. €. Increasing trend of economy and households’ deposits, starting with May this year, is encouraging (see Graph 6). Weighted average deposit effective interest rates (passive interest rate) in September 2011 was 3,11% and lower for 0,41 p.p. in comparison to September 2010. Weighted average lending effective interest rates (active interest rate) in October 2011 was 9,73% and recorded growth in comparison to September 2011 for 0,12 p.p. 7. Foreign Trade Exchange In January-October 2011 period there was significant growth of goods export for 47,4% and import for 11%. Export growth was determined primarily by aluminum export which value in this period increased for 55% and amounted 156 mil € participating with 43% in overall export. This period recorded significant increase of electricity export as a result of registered re-export over the territory of Montenegro. Export of mineral deposits and waste increased for 94 % in comparison to period January-October 2010 and was 32 mill € (partially refers to re-export). Furthermore, within this period steel export increased for 48% and within period January-October 2011 it was 23,7 mil €. In same period there was increase of import for 11%. This increase resulted from significant growth of oil and oil derivates import. This import was 173,3 mill. € and was 30% higher in comparison to the same period last year. It is important to point out that smaller quantities of derivates were imported but the price in the same time was remarkably higher. Significant increase was recorded in import of electricity (280% or 87 mill. €). This increase resulted from growth of electricity import for the purpose of internal market, as well as import for re-export. It is important to point out that electricity import in this year will grow significantly due to extremely long arid period and consequently very low accumulations. Import growth is noticeable for mineral ores and waste, but it is related to re-export over the territory of Montenegro. Import growth referring to food is 9 % in comparison to last year’s period and amounts 291 mill. € or 19 % of total import. Graph 7 Balance import &export of goods 300.0 45.0 43.0 200.0 Import 41.0 100.0 0.0 balance IX -100.0 -200.0 39.0 export X 37.0 XI XII I II III e IV V 2011 VI VII VIII IX 35.0 33.0 31.0 29.0 -300.0 -400.0 27.0 25.0 Table 1: MACROECONOMIC INDICATORS– October 2011. BDP 2010 2011 GDP in mill €1 3.104 3.273 GDP real growth in % 2,5 2,5 GDP nominal growth in % 4,1 5,5 X XI XII I II III IV V VI VII VIII IX October 2011 Jan-Oct M-n-M 2011/ JanOct 2010 X Indicators2 REAL SECTOR Industrial production 37,1 48,4 45,7 2 8,4 -10,3 -20,4 -24,4 -18,7 0,2 18 -2 -4,2 3,2 Processing industry 21,6 42,6 21,3 24,7 28,1 10,5 -6,8 9,2 3,3 9,7 28 -3,7 0,8 -0,9 8,7 -13,5 4,8 -6,4 -1,9 -13,5 -1,3 21,3 -1,7 11,2 7,5 12,2 15,3 11,6 -87,9 10,2 35,4 21,3 -46,8 29,7 100 63,2 -1,9 0,5 -31,8 -22,7 -28,3 -14,7 47,4 5,0 3,1 2,1 6,4 -7,4 15,8 3,4 37,7 16,6 15,7 17,3 27,5 17,9 23,4 23,1 -12,9 20,1 NA NA NA Nights spent in tourism Production in wood industry Retail turnover Value of works in construction 60,7 18,1 35,6 2,1 -5,9 INFLATION CPI HICP PPI 0,6 - 0,8 - 0,7 - 1,1 1,9 2,0 2,7 3,7 3,7 3,7 3,5 3,6 3,7 3,5 3,9 3,0 3,0 3,6 3,6 3,4 3,8 3,3 3,9 -2,9 2,6 3,1 NA 0,7 0,3 0,4 2,8 4,5 5,6 4,7 1,9 2,2 3,6 3,2 3,2 2,8 -12,5 3,4 157.918 157.712 157.679 157.849 158.010 158.842 159.669 162.905 168.195 170.618 167.955 165.386 NA -1,5 0,1 31.900 32.199 32.106 32.829 33.062 32.748 32.203 30.994 29.816 29.128 29.078 29.405 30.180 2,6 -2,9 11,9 12,0 12,1 12,4 12,5 12,5 12,2 11,7 11,30 11,00 10,88 11,1 11,4 2,7 -3,1 711 716 19,7 768 772 754 21,2 722 705 714 19,9 708 710 709 712 711 -0,1 1,8 477 480 515 518 506 484 473 479 475 476 475 477 477 0,0 1,8 2076,00 2087,12 2058,31 2148,74 2151,44 2092,09 2092,05 2098,70 2045,40 2034,86 2008,54 1957,30 NA -1,3 -10,9 558,28 -15,6 590,84 -17,6 522,47 -11,1 620,19 -11,3 608,99 618,02 578,08 696,19 567,46 605,56 591,57 NA -2,3 -8,2 -11,0 -15,1 -14,8 -14,4 -19,9 -19,2 -19,7 -21,9 2,6 -16,3 -8,6 -7,8 -6,1 -8,0 -7,5 -6,9 -6,8 -5,0 -3,3 -2,4 -2,4 -2,5 -4,4 -16,2 -16,8 -7,4 -4,9 -8,6 -6,8 -24,4 -22,0 -18,4 -19,1 -16,1 13,0 12,3 13,7 12,7 13,1 11,9 12,8 13,4 EMPLOYMENT AND WAGES Employment (number) Unemployment (number)3 Unemployment rate (%) Unemployment rate (MOR) (%)3 Average monthly gross wage in € Average monthly net wage in € MONETARY SECTOR 4 Total loans (in mill €) Non-performing loans (in mill €) Loans to economyi1 Loans to households1 Economy deposits 1 Individual savings1 13,6 15,1 12,8 14,0 Interest rates on loans2 9,6 9,6 9,6 9,6 Interest rates on deposits2 3,5 3,4 3,3 3,2 9,6 9,7 9,7 9,7 9,7 9,7 9,7 NA 9,6 NA NA NA NA 9,7 0,3 -5,0 3,8 -14,6 7,8 1,2 12,9 -2,2 -17,7 1,7 NA 3,2 3,2 3,0 3,1 3,1 3,2 3,1 3,1 EXTERNAL SECTOR Export 8,4 58,0 23,3 176,2 70,3 78,2 37,5 -7,0 35,3 14,7 41,0 54,3 67,4 13,7 44,7 Import -9,2 4,1 -4,7 15,3 9,9 15,3 6,6 15,5 9,4 1,7 10,4 21,3 8,7 -12,8 11,2 -12,9 -9,2 -9,8 -20,8 -2,8 1,3 -0,6 23,4 5,1 -1,0 3,2 13,5 -6,7 -21,4 3,5 34.799.784 33.261.100 71.501.650 56.447.711 19.760.965 38.002.185 30.779.365 24.964.629 8.845.435 44.210.475 18.799.693 24.087.325 28,1 -38,5 30,9 Foreign trade exchange balance Foreign direct investment (€) NA INTERNATIONAL ENVIRONMENT Brent crude oil Aluminum Euribor (12 months) Inflation in Eurozone 83,2 85,9 93,9 101,0 111,8 117,4 125,9 116,7 112,5 116,7 114,9 102,8 109,6 -10,5 2.342,2 2.324,1 2.356,7 2.439,7 2.515,3 2.555,5 2.667,4 2.587,2 2.557,8 2.525,4 2.381,0 2.293,5 2.180,7 -3,7 4,1 1,464 1,540 1,528 1,504 1,660 1,773 2,013 2,139 2,137 2,172 2,177 2,089 2,089 -4,0 40,2 1,9 1,9 2,2 2,3 2,4 2,7 2,8 2,7 2,7 2,5 2,5 3,0 3,0 20,0 64,2 Source: Monstat, Central bank of Montenegro, Employment Bureau, Ministry of Finance M-n-M stand for monthly change (indicators’ change rate of subject month in comparison to previous month in %); NA – not available 1 Data for 2011 are estimation of Ministry of Finance All indicators are presented as annual growth rates (indicators’ change rate of subject month in comparison to the same month of previous year in %) unless specified differently in title From April 2011 the source of data regarding number of employees has been changed (Central Register of Tax Administration Office (CRPO), instead of Pension Fund and Health Fund; 4 Monthly change rates period-to-period for financial sector and investment refer to September, i.e. January - September. 2 3 Table 2: BUDGET OF MONTENEGRO–October 2011 Source: Ministry of Finance, Montenegro 2010 BUDGET OF MONTENEGRO (in mill €) ORIGINAL REVENUES: Participation in total exercised revenue/ expenditure/debt I-IX ‘11 (in %) 100 IX X XI 2011 XII Jan-Oct October Jan-Oct5 Jan-Oct ’11/ Jan-Oct ‘11 plan % Jan-Oct ’11/ Jan-Oct ‘10 % Oct ‘11/ Oct ‘10 % 100,41 99.00 91,67 123,21 923.74 90.13 919.94 97.53 99.59 37.22 33,88 44.55 33,67 57,61 365.24 34.66 342.38 101.37 93.74 77.82 3.55 0,95 0.75 1,22 1,02 18.03 1.61 32.68 106.43 181.31 215.31 Value added tax 35.59 32,93 26.27 31,35 27,45 305.38 30.71 327.45 98.18 107.23 116.93 Excises 12.99 15,83 15.10 10,36 13,64 110.26 12.29 119.48 95.98 108.36 81.37 Wages tax Corporate tax 91.04 International trade and transaction tax 4.12 5,23 4.08 3,81 4,15 42.84 3.49 37.90 85.48 88.47 85.61 BUDGET EXPENDITURES: 100 100.97 111.65 109,28 175,88 937.65 90.61 984.03 94.70 104.95 81.16 29.40 20.51 30.33 22,76 42,07 218.83 22.03 284.76 90.70 130.13 72.63 Material and service 7.71 10.53 10.41 12,38 23,80 76.50 10.74 79.63 98.50 104.09 103.17 Interest rates 4.94 2.65 0.48 1,51 4,61 24.13 0.60 44.74 146.34 185.39 125.52 103.50 Gross wages and contrib. payable by employer Social care transfers 37.64 37.02 37.30 36,21 39,80 347.13 38.61 374.92 102.69 108.00 Institutions, individuals and NGO transfers 6.64 15.39 15.12 16,39 24,40 133.85 6.05 65.41 87.92 48.87 40.01 Capital budget 4.52 6.26 5.89 7,54 23,64 51.44 6.78 47.25 69.82 91.85 115.19 Budget Surplus / Deficit -0,55 -12.65 -17,61 -52,67 -13.90 -0.47 -64.09 - - - Primary deficit - 2,10 -12.17 -16,09 -48,06 10.23 0.13 -19.35 - - - Debt repayment - 11,77 29.10 4,12 30,77 180.92 11.77 148.45 - - - State debt (debt status) 100 1279,20 1270,70 1279.2 1448.0 1448.0 - 113.20 - Internal debt 26.87 361,50 358,30 361.5 383.5 383.5 - 106.09 - Foreign debt 73.13 917,70 912,40 917.7 1064.5 1064.5 - 116.00 - 5 The table compares state debt at the end of tenth month of 2011 with status at the end of ninth month of 2010. In fact, MMI was not being prepared during the previous year and analyses of state debt were done only quarterly, thus there are no comparative data for ten months.