Bar-Boljare motorway construction to push Montenegro's debt above 80% of GDP

Bar-Boljare motorway construction to push Montenegro's debt above 80% of GDP
By bne IntelliNews March 2, 2017

The International Monetary Fund (IMF) has projected that Montenegro’s general government debt will reach 82% of projected GDP by 2019 due to the construction of the Bar-Boljare motorway. This will expose the country’s economy to risks and limit the government’s ability to implement other important investments.

Montenegro’s public debt stood at €2.3bn at the end of June, equalling 60.6% of the full-year GDP forecast, according to the latest available finance ministry data. The government expects it will rise further in the coming years. In 2019 it is expected to reach 79.5% of the projected GDP compared to 70.7% estimated for 2016. The debt should then start declining, reaching 74.1% of GDP in 2021, according to government estimations.

“The country’s capacity to respond to temporary external or domestic economic shocks has likewise been diminished because of the high level of debt. Finally, large projected government refinancing needs for maturing debt will require some recourse to external markets and will expose Montenegro to more volatile international financial markets,” the IMF said in a statement following a mission to Montenegro that ended on March 1.

It added that the government will be able to spend up to €150mn a year on other capital needs, which would be equal to 3.5% of GDP. The sum would be insufficient as the country needs to invest around €1.5bn - ten times that level - in the environmental area alone to meet the requirements of the European Union. Funding for other high-return investments in public infrastructure, health, education, and social protection will also be very limited, IMF said.

The government in Podgorica has already taken steps to improve fiscal discipline this year. According to the 2017 budget plan, revenues should rise thanks to a set of measures including an increase in gasoline excises, improvements in tax administration and collection from a tax debt restructuring programme. At the same time, the government has cut social spending and public wages.

The IMF has slightly reduced its projection for Montenegro’s economic growth in 2017 to 3.25% from 3.6% forecasted in October. The forecast reflects the positive demand effect from the highway and other private investments, but also some negative impulse from the adjustment to the non-highway budget. In 2017, economic growth will be driven by investment and to a smaller extent by private consumption.

Related Articles

EBRD says 2016 net profit was around €1bn

The European Bank for Reconstruction and Development (EBRD) said it made a net profit of around €1bn in 2016, up by a quarter from the €802mn it made in ... more

Montenegro plans to privatise tourist resorts in 2017

Montenegro plans to offer state-owned stakes in several resorts and other companies from other industries this year, according to the ... more

Serbian PM proposes Western Balkan customs union

Serbia’s Prime Minister Aleksandar Vucic proposed creating a Western Balkan customs union during his meeting with Austria’s Federal Chancellor Christian Kern on February 17, the government ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss