Montenegro’s current account gap shrank 18.8% y/y to EUR 192mn in January-March on the back of narrowing trade deficit and rising net income from abroad, central bank data showed.

Exports rose 6.3% y/y to EUR 95mn in Q1, partly reflecting a low prior year base, whereas imports contracted 9.0% to EUR 353mn over the period as domestic demand remains weak. The January-March foreign trade gap, thus, shrank 13.6% y/y to EUR 258mn, equalling to 7.4% of the full-year GDP projection.

The income account surplus jumped 51% y/y to EUR 33mn in Q1 also helping redress the CA gap. The January-March increase of net income was mainly driven by rising net compensations of employees (up 6.4% y/y to EUR 45mn) and lower net outflow of other investments (mainly interest payments on loans and other financial assets).

On the other hand, the Q1 net current transfers dropped 16% y/y to EUR 26mn, reflecting falling remittances inflow (down 8.3% to EUR 33mn).

The financial account surplus edged up 0.6% y/y to EUR 143mn in January-March on rising other investments. Net FDI recorded a mild 2.2% y/y drop to EUR 66mn in Q1. However, they covered 34% of the Q1 current account deficit, improving from 28.3% a year earlier.

Portfolio investments’ negative net balance widened to EUR 8.3mn from EUR 2.7mn a year earlier due to falling equity and debt securities investments of non-residents.

Montenegro's 2012 current account gap widened 2.4% to EUR 587.2mn after shrinking nearly 24.0% in 2011, mainly due to widening foreign trade deficit.