Montenegro Economic Structure

By: EconomyWatch Content   Date: 5 April 2010

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 Montenegro economic structure is dominated by the service sector, which accounted for 72.4% of the nation’s GDP in 2007, according to World Bank reports. The Montenegrin economy, boosted by the service sector, grew by an impressive 10.7% during 2007. However, Montenegro economic structure was impacted adversely during 2008 as a result of the global financial crisis, which contracted the GDP by 4%. Despite this, Montenegro continued to attract foreign investment. In fact, Montenegro was the only nation in the Balkans to expand its direct foreign investment during the global recession.

Montenegro Economic Structure: Overview

With a picturesque coast and a mountainous terrain, Montenegro has a flourishing tourism industry. In fact, tourism is considered to be the backbone of Montenegro economic structure, generating about €480 million in revenues in 2007. The Montenegrin government invests heavily on infrastructural improvements to develop the industry and boost the economy. Porto Montenegro is an important project in this regard. Montenegro service castor has also experienced a growth due to the real estate boom in 2006-2007, with wealthy Britons and Russians who are investing heavily in property on the Montenegrin coast. As a result, Montenegro received more per capita foreign investment than any country in Europe during 2008.

 

Montenegro’s industry sector is dominated by aluminum and steel production, and agricultural processing, which account for a majority of Montenegro exports. The contribution of the agriculture sector to Montenegro economic structure is limited. However, the nation produces and exports potatoes, olives, citrus fruits and grapes in profusion.

 

The sector-wise GDP contribution to Montenegro economic structure during 2007 was as follows:

Montenegro's Sectoral GDP Composition (2007)

 (Source: World Bank)

 

Montenegro Economic Structure: Status of Financial Sector

Montenegro’s financial sector, despite being small and underdeveloped, is increasingly competitive, with improved access to financing and privatization of several banks. Consequently, the participation and investment by foreign banks in Montenegro’s financial sector is huge. While this is beneficial to the nation’s economy, the heavy dependence on FDI makes Montenegrin economy susceptible to external shocks. Despite high competition in the Montenegrin banking sector, credit prices are fairly high. This, in addition to an underdeveloped insurance industry, weighs heavily on the financial sector of Montenegro.

 

 


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