“Montenegro must strengthen economic stability” - IMF warns of major fiscal risks, calls for reforms
The Executive Board of the International Monetary Fund (IMF) projects real GDP growth of 3.2% in 2025. Average inflation is expected to remain high, around 4% in 2025, before gradually declining towards 2% over the medium term. The current account balance is expected to deteriorate to around 18% of GDP in 2025, but will improve somewhat later as temporary factors fade. However, it is unlikely to return to the levels of 2021–2023 unless the economy diversifies and moves away from consumption.
Executive Directors commended Montenegro’s resilience in the face of a challenging external environment, but stressed that the country must adapt to meet future challenges. As a small and open economy, Montenegro remains exposed to global shocks affecting tourism and relies on external financing to cover large public and external needs. The IMF stressed that strengthening the fiscal framework and structural reforms to diversify the economy are necessary to reduce these vulnerabilities.
The IMF underlines the importance of aligning the fiscal strategy with the economic cycle and with the requirements of the Fiscal Responsibility Law. They stressed the need to return fiscal policy to a sustainable primary balance. Furthermore, the IMF noted that long-term pressures on spending, due to population aging, healthcare, climate and defense, will increase, which requires structural fiscal reforms. These could include increasing efficiency in public administration and health, improving the targeting of social benefits, linking the retirement age to life expectancy and strengthening public investment management.
According to the IMF, Montenegro's banking system is well-capitalized, with ample liquidity and a low level of non-performing loans. The institution also praised the country's integration into the Single European Payments Area (SEPA).
The IMF warned that the development bank should focus on its historic mandate to expand access to credit for underserved sectors and regions, while avoiding new activities that could create fiscal or financial sustainability risks.
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