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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 (€413,000) 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:
- Consumer prices fell by 0.6% y/y in July
- Industrial production plunged by 15.5% y/y in July
- The foreign trade gap widened by 12.9% y/y to over €1bn in the first seven months of 2016

Table Of Contents

Montenegro Country Report - August, 2016
Table of Contents

1. EXECUTIVE SUMMARY 5
2. POLITICS 6
Montenegro's opposition to decide by mid-August whether to leave government 6
Montenegro's high court sentences former mayor to 18 months in jail on Budva affair 7
Montenegro's opposition ministers reportedly want to stay in government 7
Montenegro's opposition URA exits government 8
Montenegro's special prosecution reportedly investigates former President Marovic for bribery 9
Serbian radical Seselj to visit Montenegro to boost nationalists' rating ahead of general elections 10
Montenegrin opposition party Demos stays in government 10
Montenegrin opposition SDP party to stay in government 11
3. MACROECONOMIC OVERVIEW 12
Montenegro's GDP is seen at between 3.2% and 4.7% in 2016 12
Moody's downgrades Montenegro's rating to B1 on negative outlook, SandP revises outlook to negative 12
4. REAL SECTOR 12
4.1. GDP, forecasts 12
Montenegro's GDP growth slows to 1.1% y/y in Q1 12
4.2. Inflation 13
Montenegro's PPI ticks up 0.1% y/y in July 13
Decline in consumer prices slows in Montenegro as IMF forecasts return to inflation 14
Montenegro's HICP deflation eases to 0.2% y/y in July 15
4.3. Industry and trade 15
4.3.1. Industrial production 15
Montenegro's industrial output plunges by 15.5% y/y in July 15
Montenegro's industrial sales fall 21.8% y/y in July 16
4.3.2. Construction volume 16
Value of construction works in Montenegro jumps 32.1% y/y in Q2 16
4.4. Labour and retail 17
4.4.1. Unemployment and wages 17
Montenegro's unemployment rate rises to 17.32% on August 1 17
Montenegro's monthly average net wage grows 5.3% y/y in July 17
4.4.2. Retail 18
Montenegro's retail sales grow by 3.5% y/y in June 18
4. EXTERNAL SECTOR AND TRADE 19
4.1. Balance of payments 19
Montenegro's H1 current account gap widens 35.7% y/y to €661.6mn 19
4.2. Trade 19
Montenegro's 7-mo trade gap widens 12.9% y/y 19
4.3. Foreign direct investment (FDI) 20
Montenegro's Jan-May net FDI plunges to €51.4mn 20
5. PUBLIC SECTOR 21
5.1. Government debt 21
Montenegro's public debt reaches 60.6% of GDP at end-June 21
Montenegro raises €40.35mn in 182-day T-bills, yields up 21
Montenegro raises €20.964mn in 182-day T-bills, yields up 22
6. FINANCIAL SECTOR AND CAPITAL MARKETS 22
6.1. Banking system 22
Mandatory reserves of Montenegrin banks rise 10.7% y/y to €243.8mn at end-June 22
Montenegro's NPL ratio falls to 11.7% in June 23
Montenegro's banking sector H1 net profit nearly doubles y/y to €14.2mn 23
Montenegro's bank assets growth accelerates to 9.2% y/y in July 24
Montenegro's bank deposits growth accelerates in July 24
6.2. Interest rates and bond market 25
Average lending interest rate in Montenegro falls to 6.85% in July 25
6.3. Stock market 25
Montenegro Stock Exchange turnover falls 35.4% y/y in July 25
7. INDUSTRY AND SECTOR NEWS 26
Montenegro fails to attract fourth mobile phone operator with €50mn sale of new radio frequencies 26
Montenegro's finance ministry agrees to reprogramme tax debt of local media 26
Montenegro, Albania and Croatia sign MoU on Ionian-Adriatic gas project 27
8. MAJOR CORPORATE NEWS 28
Italy's Terna delays completion of submarine power link with Montenegro by two years 28
Montenegro's Crnogorski Telekom's net profit sinks 41.5% y/y in H1 28
Montenegro flag carrier's bank account reportedly frozen on unpaid debts 28
First Hilton hotel to open doors in Montenegro by end-September 29
Securities commission urges Slovenia's NLB to buy remaining stake in Montenegrin unit 29
Montenegro, A2A sign new shareholder agreement 30

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