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Montenegro Country Report - August, 2016

  • September 2016
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 31 pages

This report covers the main macroeconomic releases from August 1 to August 31, 2016 as well as the financial and political events that took place in Montenegro during this period.

Montenegro's opposition Reform Action (URA) decided to cancel its power sharing agreement between the ruling Democratic Party of Socialists (DPS) and three opposition parties, and to exit the government. The two other opposition parties that have joined the government in May the Social Democratic Party (SDP) and Demos decided to stay in the government until the October 16 general election.

Montenegro's special prosecution launched a new investigation against Svetozar Marovic, the former president of Serbia and Montenegro, on suspicion of giving a CHF450,000 (EUR413,000) bribe to ensure that evidence against him was hidden by HSBC bank. Marovic recently admitted he headed an organisation that was involved in the Budva affair. In return, he agreed to spend 4.4 years in jail. He is the first former politician at this level to be sentenced.

Serbian nationalist politician and president of the Serbian Radical Party (SRS) Vojislav Seselj will visit Montenegro ahead of the October parliamentary elections, aiming to boost the rating of Montenegro's nationalist Serb Radical Party.

Montenegro's telecommunications agency (EKIP) failed to attract a fourth mobile phone operator with the sale of new radio frequencies at a tender called in May. According to EKIP's statement, the frequencies were sold to the three operators that already are active in the country - Norway's Telenor, Montenegro's leading operator, Crnogorski Telekom and M:Tel, which is the newest player on the market.

Montenegro's finance ministry has decided to reprogramme the outstanding tax debts of 10 local media outlets, including the publisher of daily Vijesti, TV Vijesti, TV Pink and Antena M.



Key points:

oConsumer prices fell by 0.6% y/y in July

oIndustrial production plunged by 15.5% y/y in July

oThe foreign trade gap widened by 12.9% y/y to over EUR1bn in the first seven months of 2016

Table Of Contents

Montenegro Country Report - August, 2016
1.EXECUTIVE SUMMARY5

2.POLITICS6

Montenegro's opposition to decide by mid-August whether to leave government6

Montenegro's high court sentences former mayor to 18 months in jail on Budva affair7

Montenegro's opposition ministers reportedly want to stay in government7

Montenegro's opposition URA exits government8

Montenegro's special prosecution reportedly investigates former President Marovic for bribery9

Serbian radical Seselj to visit Montenegro to boost nationalists' rating ahead of general elections10

Montenegrin opposition party Demos stays in government10

Montenegrin opposition SDP party to stay in government11

3.MACROECONOMIC OVERVIEW12

Montenegro's GDP is seen at between 3.2% and 4.7% in 201612

Moody's downgrades Montenegro's rating to B1 on negative outlook, SandP revises outlook to negative12

4.REAL SECTOR12

4.1.GDP, forecasts12

Montenegro's GDP growth slows to 1.1% y/y in Q112

4.2.Inflation13

Montenegro's PPI ticks up 0.1% y/y in July13

Decline in consumer prices slows in Montenegro as IMF forecasts return to inflation14

Montenegro's HICP deflation eases to 0.2% y/y in July15

4.3.Industry and trade15

4.3.1.Industrial production15

Montenegro's industrial output plunges by 15.5% y/y in July15

Montenegro's industrial sales fall 21.8% y/y in July16

4.3.2.Construction volume16

Value of construction works in Montenegro jumps 32.1% y/y in Q216

4.4.Labour and retail17

4.4.1.Unemployment and wages17

Montenegro's unemployment rate rises to 17.32% on August 117

Montenegro's monthly average net wage grows 5.3% y/y in July17

4.4.2.Retail18

Montenegro's retail sales grow by 3.5% y/y in June18

4.EXTERNAL SECTOR AND TRADE19

4.1.Balance of payments19

Montenegro's H1 current account gap widens 35.7% y/y to EUR661.6mn19

4.2.Trade19

Montenegro's 7-mo trade gap widens 12.9% y/y19

4.3.Foreign direct investment (FDI)20

Montenegro's Jan-May net FDI plunges to EUR51.4mn20

5.PUBLIC SECTOR21

5.1.Government debt21

Montenegro's public debt reaches 60.6% of GDP at end-June21

Montenegro raises EUR40.35mn in 182-day T-bills, yields up21

Montenegro raises EUR20.964mn in 182-day T-bills, yields up22

6.FINANCIAL SECTOR AND CAPITAL MARKETS22

6.1.Banking system22

Mandatory reserves of Montenegrin banks rise 10.7% y/y to EUR243.8mn at end-June22

Montenegro's NPL ratio falls to 11.7% in June23

Montenegro's banking sector H1 net profit nearly doubles y/y to EUR14.2mn23

Montenegro's bank assets growth accelerates to 9.2% y/y in July24

Montenegro's bank deposits growth accelerates in July24

6.2.Interest rates and bond market25

Average lending interest rate in Montenegro falls to 6.85% in July25

6.3.Stock market25

Montenegro Stock Exchange turnover falls 35.4% y/y in July25

7.INDUSTRY AND SECTOR NEWS26

Montenegro fails to attract fourth mobile phone operator with EUR50mn sale of new radio frequencies26

Montenegro's finance ministry agrees to reprogramme tax debt of local media26

Montenegro, Albania and Croatia sign MoU on Ionian-Adriatic gas project27

8.MAJOR CORPORATE NEWS28

Italy's Terna delays completion of submarine power link with Montenegro by two years28

Montenegro's Crnogorski Telekom's net profit sinks 41.5% y/y in H128

Montenegro flag carrier's bank account reportedly frozen on unpaid debts28

First Hilton hotel to open doors in Montenegro by end-September29

Securities commission urges Slovenia's NLB to buy remaining stake in Montenegrin unit29

Montenegro, A2A sign new shareholder agreement30

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