Montenegro is facing unprecedented challenges due to the coronavirus (COVID-19) epidemic including a human crisis, stress to the health system and stymyied economic development, according to the UN’s Socio-Economic Response Plan to COVID-19 for Montenegro released on August 20.

The tiny Balkan country successfully achieved zero COVID-19 cases by May 24 following the first phase of infections, but on June 14, as in other countries in the Western Balkans, the country began experiencing a second wave.

The UN plan sets out key pillars of the UN’s offer of support to Montenegro to mitigate the impacts of the COVID-19 crisis.

These include ensuring essential health services to everyone, enabling people to cope with the challenges through social protection, protecting jobs and supporting small and medium-sized enterprises, guiding the fiscal stimulus and macroeconomic policies and promoting social cohesion.

The UN said that the global lockdown will impact most severely on Montenegro’s key tourism sector.

Subsequently, the UN World Tourism Organisation (UNWTO) has projected that global tourism could fall 60-80% in 2020, which is around $80bn worth of global exports.  

Montenegro’s tourist season predominantly relies on international tourist arrivals from the Balkans, Russia and the EU countries and approximately 80% of arrivals are during the summer June-September period.

This means that a significant slowdown in growth in Europe could also pose risks for the tourism industry and the broader economy. This will likely lead to a widening of the current account deficit, even if demand for imports slows, the UN report on Montenegro said.

The report was prepared by a core team of UN staff and approved by the UN Country Team (UNCT).

The size of the slowdown in income from tourism will determine the overall impact on the economy. Lower tourism receipts will mean a slowdown in overall economic activity which will impact on Montenegro’s ability to raise tax revenues, it was said.

The fiscal deficit will, thus, likely widen as a result in 2020, which will require Montenegro to either defer the continuation of its fiscal adjustment or require a sharper fiscal adjustment in the medium-term in order to meet the 60% of GDP target required for EU accession.

The prognosis for Montenegro’s economic recovery is weak with external and internal imbalances set to worsen hindering any recovery efforts.

Any contraction in the economy will have a knock-on impact on vulnerable groups and increase the probability of rising unemployment. This could generate a new group of people living in poverty and set the economy back, affecting Montenegro’s path to EU accession, according to the report.