Montenegro Country Information - economy & tourism

Since the rapid devaluation of the Yugoslav dinar in the 1990s and before the introduction of the euro, Montenegro used the German mark as its currency.

In 2002, the euro was adopted at the same time as Serbia, but the country is not a member of the European Monetary Union and is therefore not allowed to produce its own currency. However, the common currency is also a factor in inflation, and a strong currency does not necessarily translate into economic strength. Montenegro has some catching up to do and has achieved some remarkable successes. The wars and sanctions forced many industrial companies to close and tourism collapsed. The country faced up to the situation. The road networks were repaired as quickly as possible and the airports in Podgorica and Tivat were modernized. Many privatized sectors attracted investors to the country, especially in the tourism sector, with over 12,000 businesses now in foreign hands. As a result, the country experienced a rapid economic boom in the years following independence, with gross domestic product growth rates of 9%. The reason for this was the rapid expansion of the tourism sector and the resulting investments, especially from Russian entrepreneurs. This also boosted the construction sector. However, this was too much too soon, and in 2012 growth of only 0.3% was achieved. Currently, growth is rising again, although Russian companies are holding back on further investments due to Montenegro's accession to NATO.

As far as industry is concerned, progress is still lagging behind. Outdated facilities and infrastructure pose major problems and cannot meet international requirements, which is why there are still very few industrial companies and branches of large foreign firms in Montenegro today. This is changing only very slowly, mainly due to the uncertain legal situation and corruption. Nevertheless, this sector now accounts for around 19% of GDP.

The service sector generates around 72% of GDP. Within this sector, tourism accounts for around one-fifth of economic output, and the trend is rising. Even before the Yugoslav Wars, Montenegro attracted large numbers of German-speaking visitors. With the unrest, these disappeared completely and almost all visitors came from Eastern Europe, Russia, and neighboring countries. In recent years, a trend reversal has been noticeable, with more Western Europeans and travelers from other continents returning. In 2018, well over 2 million tourists visited the small country (other figures even speak of 2.5 million). Montenegro is currently one of the fastest-growing tourist destinations in the world and is deliberately focusing on year-round tourism. As a result, the dynamically developing tourism industry remains the most important source of income, and its share of GDP is expected to increase by a further 5% in the coming years thanks to a tourism master plan.

However, this cannot and should not be achieved by building new holiday resorts, which will play a minor role in the future. Instead, the focus will be on sustainable nature tourism in the areas of hiking and cycling, as well as environmentally friendly accommodation providers. Ultimately, this will also benefit weaker regions.

Agriculture ranks last in terms of economic value creation, accounting for 9% of GDP and employing only 6% of the workforce. However, great attention is being paid to its development, as each worker generates around 11,000 euros per year.

The expansion of port capacities and shipyards is also receiving increased attention. In addition, there are major investments in “environmentally friendly” energies, with comprehensive spending planned for the construction of hydroelectric power plants and wind farms, funded by the EU. In 2015, the energy market was liberalized for all consumers. Emissions limits have been in place for large industrial plants since the end of 2017. Montenegro has important mineral resources, including bauxite, lignite, iron ore, oil, and natural gas. The main exports are aluminum, steel, fuel, and agricultural products (including tobacco) to Croatia, Serbia, Slovenia, Italy, and Germany. Imports include vehicles and machinery, mineral oils, fuels, chemical products, and foodstuffs, mainly from the EU (Italy, Greece, Germany) and China.

Russia plays a major role exclusively in the real estate sector.

The foreign trade deficit is very large at €1.8 billion. The unemployment rate is also still extremely high at over 9%, and the average per capita income is only around €280 to €860 per month, depending on the sector of employment.