The Montenegrin economy shrank 0.5% last year mainly because it was unable to recover from the 2.3% annual drop registered in the first three months alone when the country and the region was hit by severe weather conditions, finance minister Radoje Zugic said last week. Zugic told reporters after the cabinet meeting that last year’s GDP contraction estimate is still very preliminary and final data will be available in August.

The economy inched down a real 0.3% y/y in the fourth quarter of 2012 after falling 0.2% y/y in Aug-Sep and expanding by a tiny 0.3% in Q2 – the only quarter of growth last year.

This means the economy plunged into recession again last year after gaining ground in the previous two years (up 3.2% in 2011 and 2.5% in 2010) from a 5.7% contraction in 2009 – when Montenegro first felt the impact of the global crisis. Furthermore, the government projected a 0.5% growth for last year as did all other international institutions - the EC saw a sluggish increase of 0.2% and the EBRD – up 0.3%.

For this year, the government has adopted this year's budget based on expectations for a 2.5% economic growth.

Zugic said on March 28 that current fiscal data signal optimism as current revenue for the Jan-Mar period is already up 13% on the year, or by some EUR 25mn. According to him, this provides for a more stable fiscal position that gives room for generating new added value and new higher GDP level.