Montenegro’s foreign trade deficit widened by 13.9% y/y to €1.17bn in the first eight months of 2016 as imports rose faster than exports, statistics office data indicated on September 26. In August alone, the deficit expanded 19.2% y/y to €168mn.

Imports are expected to rise by an average of 2.9% per year until 2018 due to expected higher imports of construction materials and equipment as well as imports of services for the construction sector. Much of this is connected to the construction of the Bar-Boljare motorway which will be one of the main drivers of GDP growth until 2018. 

Construction of the first priority section of the Bar-Boljare motorway, from Smokovac to Matesevo, started in April 2015. The stretch is being built by Chinese firm CRBC, with a €689mn loan from China Exim Bank covering most of the €809mn cost. 

Moody’s warned in May that the project would increase Montenegro’s external debt and there was a risk of cost overruns. “Montenegro's focus on large-scale investment projects, such as the highway, and the country's high import penetration imply sizeable external imbalances over the next years,” the rating agency noted.

The Smokovac-Matesevo section is due to be completed within 48 months, but Deputy Prime Minister Vujica Lazovic admitted on September 16 that work is behind schedule, and €100mn earmarked for the project this year will now be used to pay benefits to large families. 

Meanwhile, Montenegro’s government has projected that exports will rise by an average of 5.7% per year until the end of 2018 on the back of higher services exports.

The export-import coverage ratio fell to 14.7% in January-August from 15.6% a year earlier.

Montenegro’s exports moved up 5.8% y/y to €202.6mn in January-August, while imports increased 12.6% y/y to €1.38bn. Manufactured goods classified by their material dominated among exported items while machinery and transport equipment were the top import products.

The main export destinations for Montenegrin producers were Serbia (€45.8mn), Hungary (€29.1mn), and Bosnia & Herzegovina (€14.3mn). Serbia was also the main source of imports (€303.4mn), followed by Germany (€157.6mn) and China (€127.8.mn).

Montenegro’s foreign trade deficit widened 5.0% y/y to €1.52bn in 2015 mainly due to falling exports.

External trade, €mn	Jan-Aug'15	Jan-Aug'16	y/y, %
Trade balance	-1,032.5	-1,176.1	13.9%
Exports	191.5	202.6	5.8%
Imports	1,224.0	1,378.7	12.6%
Source: Monstat