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2023/05/31 / Erste Group Research

Resilient recovery despite global headwinds

Notwithstanding some moderation of growth in 2H22, Montenegrin economy still performed well, rising 6.1% y/y in 2022. Growth was driven by strong private consumption, following favorable policy measures and good tourist season.

Global conditions have improved since our last report, although still characterized by a large degree of uncertainty. We have slightly upgraded (+0.5pp) our FY23 GDP forecast to 3.3% y/y, followed by similar growth expectations for next year (3.4% y/y).

Inflation peaked at 17.5% y/y in November and started to decline thereafter, dropping to 8.6% y/y in April. Most of the inflation is explained by increases in food prices (23.2% y/y) and fuel prices (35.5% y/y) following global shocks after the outbreak of war in Ukraine. We expect inflation to moderate towards 7.4% y/y on average this year, before further normalization next year (3.5% y/y).

The rebalanced budget gap for 2023 was lowered to 3% of GDP, down from 5.8% of the GDP, due to a budgeted 10% increase on the revenue side. Gross refinancing needs for 2023 are thus lower by roughly EUR 170mn, but remain relatively high, at around 7% of GDP.

Political instability remains a source of domestic risk. The country has been at a political standstill since August last year, and the collapse of the second government that year. Following recent presidential elections, parliamentary ones are scheduled for June.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focus-
Currency in focus-
Sector in focus-


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