The Montenegrin delegation meets with the World Bank representatives: Economic recovery faster than expected, fiscal consolidation progress


20/10/2021

As part of the regular International Monetary Fund (IMF) and the World Bank (WB) Annual Meetings, delegations from the Ministry of Finance and Social Welfare (MFSW) and the Central Bank (CBCG) met with Anna Bjerde, World Bank Vice President for Europe and Central Asia, and Koen Davidse, Executive Director of the Dutch constituency at the World Bank.


The World Bank representatives assessed that Montenegro’s economic recovery was faster than expected. They congratulated Montenegro on progress in fiscal consolidation and supported further recovery and development measures.


Presenting the current performance effects and the upcoming measures for Montenegro’s better living standard, the Minister for Finance and Social Welfare, Milojko Spajić, pointed out the importance of the World Bank’s technical and professional support to the country that is now in a good position.


Vice President Bjerde commended the results achieved so far and offered expert assistance in the pension system and public administration reforms.


“Your efforts are already visible this year, it is an outstanding achievement. We will gladly support you,” said Bjerde.


Director Davidse commended “the excellent tourist season and Montenegro’s faster-than-expected economic recovery”. The World Bank recently raised its 2021 growth outlook for Montenegro to almost 11%.


Minister Spajić said to expect an even better country’s fiscal and economic result. He reminded of the 2020 economic decline of over 15% and a significant recovery already recorded this year.


“Montenegro achieved great success in this tourist season and recorded about 700 million euros revenues in 9 months, which was this year’s projection. Government debt is declining, and the goal is to be around 78% of GDP by the end of the year. In the first 8 months of this year, the budget deficit declined to 1.2%, being one of the lowest in Europe. It amounted to almost 11% last year, while the 2021 budget projected at just above 3%”, specified Spajić.


The CBCG Vice-Governor Nikola Fabris informed about the banking sector’s condition through the prism of the latest data for the first nine months of the current year. He pointed out that all banking operations ratios recorded positive trends. Thus, compared to end-2020, the banks’ assets at the end-September 2021 increased 12.5%, loans increased 10.8%, banks’ capital grew 6.7%, and deposits by almost 18.3%. 


Vice Governor Zorica Kalezić thanked the World Bank representatives for this institution’s technical assistance to the CBCG. The assistance includes developing the National Retail Payments Strategy, standardising the national QR code, and creating a regulatory Fintech sandbox. Kalezić welcomed the opportunity to discuss potential future support in this area through the new World Bank’s Country Partnership Framework with Montenegro for the next four-year period that is being prepared.


Minister Spajić presented the upcoming set of measures from the “Europe Now” programme for the citizens’ living standard growth. He emphasised that, inter alia, the minimum wage will increase from 250 to 450 euros. The existing high workload contributions will almost half and relieve the economy that should lead to increased salaries of Montenegro’s employees by about 17.5%. In that context, he presented the idea of organissing a regional meeting to present the benefits of the “Europa Now” measures for standard improving. Vice President Bjerde noted that the World Bank could contribute its expertise to such an event. 


After presenting the results and plans for the upcoming period, Director Davidse commended Montenegro.


Spajić reminded that the MFSW and the Government provided a hedging arrangement to protect from currency risk of funds withdrawn from the Chinese loan. So far, it has brought almost 4 million euros of savings in the first instalment to the state, and some 8 million is expected annually. He explained that hedging would last 14 years, the same period as the highway’s first section repayment. Still, it is possible to review the conditions in 2 years – to meet Montenegro’s interest.


Vice-President Bjerde commended Montenegro’s progress in fiscal consolidation. She added that the World Bank supported and encouraged the authorities to continue activities strengthening public finances and preserve financial stability further. 


The World Bank representatives expressed their full readiness to continue supporting Montenegro.