Montenegro Economy

By: EconomyWatch Content   Date: 5 April 2010

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 Montenegro, located in Southeastern Europe, was a part of the Federal Republic of Yugoslavia (FRY) with Serbia. The nation declared its independence from the republic on June 3, 2006. With the dissolution of the political union with Serbia, Montenegro applied for separate membership with international financial institutions, such as the World Bank, International Monterey Fund and the European Bank for Reconstruction and Development. With a total area of 13,812 sq km, Montenegro borders Albania, Bosnia and Herzegovina, Croatia, Kosovo and Serbia. Despite the small size of the domestic market, Montenegro economy managed a GDP of $4.444 billion, according to 2009 CIA World Factsheet reports.

Montenegro Economy: Overview

 

Montenegro economy is on the path of expansion, with increased focus on attracting foreign investment. The Montenegrin government has privatized the nation’s aluminum complex and financial sector, both of which are dominant contributors to Montenegro economy industry. Existing Montenegro laws treat foreign and domestic capital similarly. Also, starting a business in Montenegro takes 13 days on an average, in comparison to the world average of 38 days. This is reflective of the nation’s highly conductive business environment.

 

Some key indicators of Montenegro economy during 2009, according to CIA World Factsheet reports, were as follows:

 

Economic Indicator
Value

GDP Per Capita (Purchasing Power Parity)

$6.637 billion

GDP - per capita

$9,800

GDP Official Exchange Rate

$4.444 billion

GDP Real Growth Rate

-4%

Unemployment Rate

14.7%

 

 

Role of Government in Montenegro Economy 

Prices in Montenegrin economy are largely determined by market forces. The government, however, exerts influences over prices of some commodities, including energy, utility and transport, through state-owned enterprises. The government also invests heavily in the economy. According to the 2010 Index of Economic Freedom, the government spending, including transfer payments and consumption, was about 39.0% of the nation’s GDP.

 

Despite persistent efforts, Montenegro’s economic growth has been slower than anticipated as a result of hidden bureaucracy and corruption in the system. Regional disparities and unemployment are other key factors hindering Montenegrin economic growth. Also, the global financial crisis has weighed in heavily on the economy of Montenegro, primarily because of a decline in Montenegrin aluminum exports. 

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