Montenegro was the most underdeveloped republic of Yugoslavia, and today it is one of the most developed and the most stable countries in the Balkans. Montenegro is a country with small but dynamic market-oriented economy. During the past ten years, and particularly since it regained its independence, Montenegro achieved major progress measured in increase of the GDP. Since 2003, Montenegro doubled its GDP (according to the Atlas method of the World Bank), from 2.400$ to 7.220$ in 2012. Today, Montenegro has the highest GDP among the 6 countries of the Southeastern Europe.
Economic regulations of Montenegro have been mainly accorded to the European Union regulation. The official currency is euro. Low taxes, free trade regime and transfer of capital, followed by the business ambient in constant progress, make Montenegrin economy very attractive for foreign investment.
Montenegrin economy is based on small and medium enterprises that create more than a half of GDP. The sector of services makes up more than 60% of GDP. The availability of natural resources causes Montenegrin economy to rely mostly on tourism and energetic, that, at the same time attract the major attention of foreign investors. The sector of agriculture participates with 7.4% in overall economy, and employees mostly local workforce.
The South of Montenegro is more developed than its North region. The percent of the overall unemployment is 18% and it is more present in northern municipalities than in the South. At the same time, the significant number of non-residents from the region and some EU member states is engaged on permanent and temporary jobs, mostly in tourism, infrastructure and agriculture.
The average neto income in Montenegro is 480 EUR, and average pension is at level of 60% of average income. Inequality in income distribution (GINI ratio of 26.5%) is lower than European and Central-Asian average.
Montenegro became member of the World Trade Organization in 2011. Free trade agreements, that Montenegro signed with the European Union, EFTA, CEFTA, Russian Federation, Turkey and Ukraine, empower Montenegrin companies to enter the market of more than 800 million citizens.
Through trade flows, investment and tourism, Montenegrin economy is highly connected to the region and the European Union. Foreign trade exchange is highest with the signatories of CEFTA agreement and the European Union. The largest number of tourists comes from Serbia, Russia, Bosnia and Herzegovina, Albania.
Montenegro is connected to the region and the world with two international airports, railroads, maritime transport, and roads.On the coast of the Adriatic sea there are several international ports, amognst which the Bar Port is the most significant one, able to receive large cargo ships. Bar Port is by railroad and road infrastructure connected to the region and Central Europe via Belgrade and Budapest.
In foreign relations, the economy of Montenegro records deficit of over 20% GDP. Deficit is financed through the significant capital income from abroad, as well as high income from remainders. Income from foreign direct investment as part of the GDP was over 20% of GDP in past years, and income from remainders was over 5% of GDP. Deficit in foreign trade is partially moderated through suffcite from services, predominantly in tourism sector.
State consumption is at level of 45% of GDP. Taxes are low – VAT is 19%, and taxation of income is proportional – 9%. In years that followed the independence referendum, budget surplus was recorded. However, global financial crisis in 2008. caused halt in capital inflows and problems in bank sector, which pushed the whole economy in recession, and caused bidget deficite. Under the pressure of the budget deficite and reduction of economic activities, public debt increased in recent years. Budget deficite was 4% of GDP in 2013, and public debt 56% of GDP.
In many areas, Montenegro has made impressive progress in transition. Numerous structural reforms have been realized in public and financial sector. Business ambient and competetiveness are significantly improved. International organizations, such as World Bank, European Bank for Reconstruction and Development, World Economic Forum, Heritage Foundation and others, recognize this progress. In World Bank Report on ease of doing business, Montenegro improved its position for 46 places in the period from 2009. to 2014, now being the 44th among 189 economies of the world. In Global Competitiveness Report, Montenegro is ranked 67th among 148 economies in 2014, which represents improvement in 5 positions for the period of one year. In The Travel & Tourism Competitiveness Report for 2012. Montenegro is ranked 40th, among 140 countries. In Heritage Foundation Economic Freedom Report, Montenegro is in the zone of moderately free countries, being 68th among 178 countries, with 63.6 points. According to the Fraser Institute, Montenegro is 49th. Credit and rating agency Standard and Poor's estimated credit rating of Montenegro to BB-.
In recent years, particular attention is paid to investment in infrastructure, which is underdeveloped and imposes limitations on progress. Major projects in infrastructure, tourism and energetic are already initiated or in preparation phase.
Continuation of structural reforms, particularly in education, healthcare, labour market, social and pension insurance, as well as increased interest of investors, along with positive economic implications brought by the process of EU and integration, could speed up economic development and improve standard of living for Montenegrin citizens thus approaching it to the developed European countries.