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Economic Impact and Response
by Montenegro
Dragana Radevic PhD
CEED Montenegro
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
• Ruling coalition regained majority votes
PROCESS OF INTEGRATION
• EU Integration
• NATO membership
• Final phase WTO accession negotiations
ECONOMIC REFORMS - CONCEPT
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Openness
Monetary stability – EUR as legal tender
Low level of business regulation
Low level of taxation (CIT – 9%, PIT – 12%)
Free regime of capital flows
New property schame
85% of the economy privatized (cont. in 2009)
ACHIEVEMENTS
• Fastest GDP growth in the region: average growth
rate in last three years – 9%
• Standard & Poor’s Credit Rating: since March 2007 –
BB+
• Leader in Europe by FDI per capita
• EURO – legal tender – low inflation
• Significant decrease of unemployment rate
• Budget surplus for three years continuously
• Low level of public debt
GLOBAL CRISIS
GDP Growth Projections for the Region
RESPONSE TO GLOBAL FINANCIAL
CRISIS (1)
• 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
CRISIS (2)
• 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
CRISIS (3)
• Strengthening the investment in infrastructure
• Increasing support to the development of the private
sector
• Increasing 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
CRISIS (4)
• Macro fiscal scenarios revised in the first quarter of
2009 with growth rates of 0% and -2.5% for 2009
• 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
• 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!
Dragana Radevic, PhD
CEO
[email protected]
www.ceed-consulting.com