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2019/11/28 / Erste Group Research

Montenegro Outlook: Back to normal

As highlighted in our earlier reports, economic growth returned closer to potential levels in 2019, with 1Q growth landing at 3% y/y. Growth slightly accelerated in 2Q19, coming at 3.2% y/y. Structure wise, positive domestic demand contribution eased a bit, as household consumption landed at 3.1% y/y, while GFCF recorded negative print at -3.8% y/y. The gap was overcome with further improvement on the net export side, as exports rose 6.8% y/y, while import growth slowed to 3.2% y/y. Taking into account slightly better external developments then previously envisaged we have upgraded our FY19 GDP forecast by 0.2pp to 3.3% y/y.

We forecast an unchanged growth pace next year, with official completion of the first phase of the highway set for September. Growth will continue to be largely domestically driven, albeit to a lower extent, while the negative net exports drag is projected to ease, reflecting lower import needs after highway completion.

Undershooting of inflation in Montenegro has been even stronger than elsewhere in the region, reflecting relatively high base effect after 2018’s VAT and excise hike, alongside the impact of low commodity prices. We have accordingly cut our forecast for this year and the next, and expect inflation to average 0.3% and 1.2% in 2019 and 2020 respectively.

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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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