Economy of Montenegro
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The economy of Montenegro is currently in a process of transition, as it navigates the impacts of the
Yugoslav Wars The Yugoslav Wars were a series of separate but related Naimark (2003), p. xvii. ethnic conflicts, wars of independence, and insurgencies that took place in the SFR Yugoslavia from 1991 to 2001. The conflicts both led up to and resulted from ...
, the decline of industry following the dissolution of the
Yugoslavia Yugoslavia (; sh-Latn-Cyrl, separator=" / ", Jugoslavija, Југославија ; sl, Jugoslavija ; mk, Југославија ;; rup, Iugoslavia; hu, Jugoszlávia; rue, label=Pannonian Rusyn, Югославия, translit=Juhoslavija ...
, and
economic sanctions Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. Economic sanctions are not necessarily imposed because of economic circumstances—they ma ...
imposed by the
United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and security, develop friendly relations among nations, achieve international cooperation, and be a centre for harmoniz ...
. Montenegro joined the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and ...
on 29 April 2012. Montenegro joined the
North Atlantic Treaty Organization The North Atlantic Treaty Organization (NATO, ; french: Organisation du traité de l'Atlantique nord, ), also called the North Atlantic Alliance, is an intergovernmental military alliance between 30 member states – 28 European and two No ...
on 5 June 2017. The
accession of Montenegro to the European Union Accession of Montenegro to the European Union is on the current agenda for future enlargement of the EU. Shortly after voting for independence from the State Union of Serbia and Montenegro in a referendum in 2006, Montenegro began the proces ...
is planned for 2025.


History

As a relatively small principality founded in 1852,
Montenegro ) , image_map = Europe-Montenegro.svg , map_caption = , image_map2 = , capital = Podgorica , coordinates = , largest_city = capital , official_languages = M ...
's economy was originally wholly based in agriculture, but it began developing an industrial economy at the turn of the 20th century. Growth was hampered by its small population, lack of raw materials, an underdeveloped transport network, and a comparatively low rate of domestic and international investment. The first industrial enterprises built in Montenegro were wood mills, an
oil refinery An oil refinery or petroleum refinery is an industrial process plant where petroleum (crude oil) is transformed and refined into useful products such as gasoline (petrol), diesel fuel, asphalt base, fuel oils, heating oil, kerosene, lique ...
, a
brewery A brewery or brewing company is a business that makes and sells beer. The place at which beer is commercially made is either called a brewery or a beerhouse, where distinct sets of brewing equipment are called plant. The commercial brewing of bee ...
, salt works, and electric
power plants A power station, also referred to as a power plant and sometimes generating station or generating plant, is an industrial facility for the generation of electric power. Power stations are generally connected to an electrical grid. Many pow ...
. Economic development was interrupted by several wars, including the
First Balkan War The First Balkan War ( sr, Први балкански рат, ''Prvi balkanski rat''; bg, Балканска война; el, Αʹ Βαλκανικός πόλεμος; tr, Birinci Balkan Savaşı) lasted from October 1912 to May 1913 and invo ...
(1912–13),
World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...
(1914–18), and
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposing ...
(1939–45). Throughout the first half of the 20th century, agriculture continued to dominate Montenegro's economic activity.


The Yugoslavian era

Montenegro's economy was developed significantly after World War II, as the country was integrated into the
Socialist Federal Republic of Yugoslavia The Socialist Federal Republic of Yugoslavia, commonly referred to as SFR Yugoslavia or simply as Yugoslavia, was a country in Central and Southeast Europe. It emerged in 1945, following World War II, and lasted until 1992, with the breakup of Yu ...
and experienced a period of rapid urbanization and industrialization. Its industrial sector included the generation of electricity, steel and
aluminum Aluminium (aluminum in American and Canadian English) is a chemical element with the symbol Al and atomic number 13. Aluminium has a density lower than those of other common metals, at approximately one third that of steel. It ha ...
production, coal mining,
forestry Forestry is the science and craft of creating, managing, planting, using, conserving and repairing forests, woodlands, and associated resources for human and environmental benefits. Forestry is practiced in plantations and natural stands. ...
and
wood processing Wood processing is an engineering discipline in the wood industry comprising the production of forest products, such as pulp and paper, construction materials, and tall oil. Paper engineering is a subfield of wood processing. The major wood pro ...
, textiles, and tobacco manufacturing, while international trade, shipping, and tourism became increasingly important by the late 1980s.


Post-Yugoslavia

Following the dissolution of Yugoslavia in the early 1990s, Montenegro's entire industrial production system effectively collapsed, leading to shortages of many goods and skyrocketing prices for them. Due to its political alliance with Serbia and favourable geographic location, with access to the
Adriatic Sea The Adriatic Sea () is a body of water separating the Italian Peninsula from the Balkan Peninsula. The Adriatic is the northernmost arm of the Mediterranean Sea, extending from the Strait of Otranto (where it connects to the Ionian Sea) to t ...
and a shipping-link to
Albania Albania ( ; sq, Shqipëri or ), or , also or . officially the Republic of Albania ( sq, Republika e Shqipërisë), is a country in Southeastern Europe. It is located on the Adriatic and Ionian Seas within the Mediterranean Sea and shares ...
across
Lake Skadar Lake Skadar ( sh-Cyrl-Latn, Скадарско језеро, Skadarsko jezero, ; sq, Liqeni i Shkodrës, ) also called Lake Scutari, Lake Shkodër and Lake Shkodra lies on the border of Albania and Montenegro, and is the largest lake in Southern ...
, Montenegro became a hub for smuggling activity during the 1990s. The smuggling of petrol and cigarettes, in particular, became a de facto legalised practice within the country.


Dissolution of State Union with Serbia

In 1997,
Milo Đukanović Milo Đukanović ( cnr, Мило Ђукановић, ; born 15 February 1962) is a Montenegrin politician serving as the President of Montenegro since 2018, previously serving in the role from 1998 to 2003. He also served as the Prime Minister ...
took control of Montenegro's ruling party, the
Democratic Party of Socialists of Montenegro The Democratic Party of Socialists of Montenegro ( cnr, Демократска партија социјалиста Црне Горе, Demokratska partija socijalista Crne Gore, DPS) is a populist political party in Montenegro. A former long-time ...
, and began severing political ties with
Serbia Serbia (, ; Serbian: , , ), officially the Republic of Serbia (Serbian: , , ), is a landlocked country in Southeastern and Central Europe, situated at the crossroads of the Pannonian Basin and the Balkans. It shares land borders with Hungar ...
. He blamed the policies of Serbian President Slobodan Milošević for the overall decline of the Montenegrin economy. Resurgent inflation led the Montenegrin government to "
dollarize Currency substitution is the use of a foreign currency in parallel to or instead of a domestic currency. The process is also known as dollarization or euroization when the foreign currency is the dollar or the euro, respectively. Currency subs ...
" the economy, adopting the German mark as its dominant currency. These economic policies also led to a revision of the relationship between the two countries from a federal republic to a much looser political union of Serbia and Montenegro, in which the Montenegrin government assumed responsibility for its own economic policies. Montenegro subsequently opened up many of its economic sectors to privatization and introduced a
value-added tax A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the en ...
(VAT) to raise funds for public projects. It would later replace the German mark with the
Euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
as its
legal tender Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in ...
, despite objections from Brussels. However, the implementation of these economic "reforms" did not significantly improve the living standard of Montenegrins during this period. The Montenegrin government blamed its problems on Serbia, which suffered from a higher level of foreign debt and unemployment, as well as an investigation by the Hague war crimes tribunal and controversy over the independence of its province of Kosovo. These factors hampered Montenegro's attractiveness to investors and delayed its progress toward full membership in the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been de ...
and
NATO The North Atlantic Treaty Organization (NATO, ; french: Organisation du traité de l'Atlantique nord, ), also called the North Atlantic Alliance, is an intergovernmental military alliance between 30 member states – 28 European and two No ...
. On 21 May 2006, the people of Montenegro voted by
referendum A referendum (plural: referendums or less commonly referenda) is a direct vote by the electorate on a proposal, law, or political issue. This is in contrast to an issue being voted on by a representative. This may result in the adoption of a ...
to declare independence from Serbia


Post-independence

Following the independence referendum, Montenegro's economy has evolved to highlight its service sector, with a goal of becoming an elite tourist destination, and is navigating the process of joining the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been de ...
. Attempts to attract foreign investors for large infrastructure projects are ongoing, as these projects are integral to its development as a tourist destination. Montenegro experienced a real estate boom in 2006 and 2007, with wealthy
Russians , native_name_lang = ru , image = , caption = , population = , popplace = 118 million Russians in the Russian Federation (2002 '' Winkler Prins'' estimate) , region1 = , pop1 ...
,
Britons British people or Britons, also known colloquially as Brits, are the citizens of the United Kingdom of Great Britain and Northern Ireland, the British Overseas Territories, and the Crown dependencies.: British nationality law governs mod ...
and others buying property on the Montenegrin coast. As of 2008, Montenegro received more foreign investment per capita than any other nation in Europe. However, the
Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
did slow economic growth, as several infrastructure projects, such as the development of
Velika Plaža Velika Plaža ( sq, Plazhi i Madh; sr-cyrl, Велика Плажа, ;, lit. "Big Beach") is a beach in Ulcinj Municipality, Montenegro. It stretches from Port Milena in Ulcinj to the Bojana River, which separates it from Ada Bojana.
,
Ada Bojana Ada Bojana ( cnr, Ада Бојана, ; Albanian: Ishulli i Bunës) is an island in the Ulcinj Municipality in Montenegro. The name ''Ada'' means river island in Serbo-Croatian. The island is created by a river delta of the Bojana River. It ...
, Buljarica,
Jaz Beach Jaz ( sr-Cyrl, Јаз, ) is a beach in the Budva Municipality in Montenegro. It is located 2.5 km west of Budva. It consists of two parts, one 850 m long and the other, formerly a nudist beach, 450 m long. It is a pebble beach, with a campgr ...
, and the construction of the Bar-Boljare motorway and new
power plant A power station, also referred to as a power plant and sometimes generating station or generating plant, is an industrial facility for the electricity generation, generation of electric power. Power stations are generally connected to an el ...
s had to be postponed. The recession was also very difficult for the Podgorica Aluminium Plant, which was initially built in 1969 and was the biggest single contributor to the Montenegrin
gross domestic product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is oft ...
. The plant, first sold to Oleg Deripaska's
En+ Group En or EN may refer to: Businesses * Bouygues (stock symbol EN) * Esquimalt and Nanaimo Railway (reporting mark EN, but now known as Southern Railway of Vancouver Island) * Euronews, a news television and internet channel Language and writing * ...
in 2005, declared bankruptcy in 2013 and was sold to local magnate Veselin Pejovic's Uniprom in 2014. In the first half of 2012, Montenegro exported goods, mostly metals, worth €182.3 million, which was 14.6% less than in the same period of the preceding year. Its major export partners include Croatia, Serbia, Bosnia and Herzegovina, and Hungary. Montenegro's imports in the first half of 2012, mostly food, oil, and electrical energy, were worth €864.9 million, which was 2.6% more than the same period in 2011. Its major import partners include Serbia, Greece, and Bosnia and Herzegovina. The banking sector of Montenegro has a significant share of foreign capital. Banks in Montenegro provide both retail and corporate banking products under one roof, and most offer non-resident accounts, usually to both natural persons and legal entities. The
Port of Bar The Port of Bar ( Montenegrin: ''Luka Bar'', ''Лука Бар'', MNSELUBA is Montenegro's main sea port. It is located in Bar. History The Port of Bar was used as a sea port for Shkodër before it was conquered by the Turks in 1571. Right after ...
is the country's primary communication with the maritime trade. Its terminal is specialized in bulk shipment of bauxite and other ores, grain, wood products acetic acid and petroleum derivatives. In 2019 its allowable draft was reported as 12.8m and several private storage tanks exist on site, to service trade. According to a EU subsidy project document, it was noted in 2019 that Volujica quay had deteriorated and degraded rapidly in the previous several years. Ro–Ro traffic from Bari and
Ancona Ancona (, also , ) is a city and a seaport in the Marche region in central Italy, with a population of around 101,997 . Ancona is the capital of the province of Ancona and of the region. The city is located northeast of Rome, on the Adriatic ...
is handled through an operational quay which is 400m long with water depth of between 4m and 5.9m.


Taxation

In addition to VAT, a tax rate of 9% is applied to monthly personal gross income below €751 per month, and a tax rate of 11% is applied for income above that. Montenegrin municipalities also apply an income tax surcharge equivalent to 15% of the national tax rate. Additional income reported in an annual tax return is also subject to a 9% tax rate.


Agriculture of Montenegro

In July 2006 prior to EU integration efforts a survey document was produced by the Ministry of Agriculture, Forestry and Water Management for the EU-funded project ''Agriculture and Rural Development Strategy of Montenegro''. The Statistical Office of Montenegro learned as late as November 2021 how to collect its data in formats acceptable to the
European Commission The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body ...
. Since 2010 agricultural trade relations between the EU and Montenegro have been governed by the EU-Montenegro Stabilisation and Association Agreement, and with the exception of beef, sugar and wine all agricultural products originating in Montenegro can enter the EU duty free. The EU has a large agri-food trade surplus with Montenegro, and exports meat, dairy and food preparations. The EU mainly imports vegetables such as mushrooms, wine and oils from Montenegro. It was reported by the EC
Directorate-General for Agriculture and Rural Development The Directorate-General for Agriculture and Rural Development (DG AGRI) is a Directorate-General of the European Commission. The DG AGRI is responsible for the European Union policy area of agriculture and rural development. The work of the DG AGRI ...
in March 2019 that the share of agriculture in Montenegro's
GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
was 8%. Agricultural land accounts for 38% of the total. Olives and citrus fruits are grown in the coastal region, while seasonal vegetables and tobacco are produced in the central areas. In the north of the country ungulates dominate the farming. The largest share of the land consists of pasture and grassland. Montenegro became a member of the UN International Fund for Agricultural Development (IFAD) in 2015, which notes that the rural population represents one-third of the total. In 2019 the IFAD focused its activities "on the key challenges of better connectivity and higher productivity by (i) fostering the graduation of micro and small agricultural holdings from the current non-viable subsistence-type agriculture toward semi-commercial and commercial agriculture, through investments in pro-poor rural infrastructure, (ii) promoting the aggregation of smallholders within inclusive value chain clusters and (iii) supporting the proactive role of municipalities to deploy investment to promote inclusion for entire sectors of the rural population." Over the years 2009 to 2019 the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
contributed a development project called the ''Montenegro Institutional Development and Agriculture Strengthening Project'', by which (amongst other highlights) the food safety system was upgraded in EU compliant manners, a Border Inspection Post with
veterinary Veterinary medicine is the branch of medicine that deals with the prevention, management, diagnosis, and treatment of disease, disorder, and injury in animals. Along with this, it deals with animal rearing, husbandry, breeding, research on nutri ...
and phyto-sanitary controls was established in the
Port of Bar The Port of Bar ( Montenegrin: ''Luka Bar'', ''Лука Бар'', MNSELUBA is Montenegro's main sea port. It is located in Bar. History The Port of Bar was used as a sea port for Shkodër before it was conquered by the Turks in 1571. Right after ...
, an electronic farm register was created, procedures for the classification of farm and food establishments were completed according to EU norms, and the Veterinary Diagnostic Laboratory in
Podgorica Podgorica (Cyrillic: Подгорица, ; lit. 'under the hill') is the capital and largest city of Montenegro. The city was formerly known as Titograd (Cyrillic: Титоград, ) between 1946 and 1992—in the period that Montenegro form ...
was accredited in
ISO 17025 ISO/IEC 17025 General requirements for the competence of testing and calibration laboratories is the main ISO/IEC standard used by testing and calibration laboratories. In most countries, ISO/IEC 17025 is the standard for which most labs must h ...
analysis methods.


See also

* Outline_of_Montenegro#Economy_and_infrastructure_of_Montenegro * Geography of Montenegro * Geology of Montenegro * History of Montenegro * Economy of Serbia and Montenegro


Notes


References


External links


Montenegro Economy and Financial NewsThe Njegoskij Fund Public Project >> Country Profile on MontenegroCIA World Factbook - Montenegro
a slideshow by ''
The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid d ...
''. {{Economy of Europe
Montenegro ) , image_map = Europe-Montenegro.svg , map_caption = , image_map2 = , capital = Podgorica , coordinates = , largest_city = capital , official_languages = M ...