EBRD revises down Montenegro's economic growth forecast

The European Bank for Reconstruction and Development (EBRD) said on Wednesday that it has lowered its 2026 gross domestic product (GDP) growth forecast for Montenegro to 2.9%, down from 3.2% projected in February, News.Az reports, citing SeeNews.

The bank said Montenegro’s GDP growth is expected to accelerate to 3.0% in 2027, supported by progress toward European Union accession and increased infrastructure investment, according to its June 2026 Regional Economic Prospects report.

It warned that “limited fiscal buffers and a lack of diversification leave the economy vulnerable to external shocks,” adding that risks linked to the conflict in the Middle East are partly offset by the potential diversion of tourism from countries closer to the conflict zone.

The EBRD noted that Montenegro’s economic growth slowed to 2.7% in 2025 from 3.2% in 2024, mainly due to the temporary closure of the country’s only thermal power plant, TE Pljevlja, and weaker tourism performance. Other service sectors remained strong, supported by increased private consumption driven by higher wages and pensions, while net exports weighed on growth due to falling exports and increased electricity imports following the plant’s shutdown.

In early 2026, tourism activity remained relatively weak, while electricity production improved after the resumption of operations at TE Pljevlja at the end of the previous year. Retail trade continued to benefit from rising real incomes.

At the same time, higher oil prices, expansionary fiscal policy, and earlier wage growth pushed annual inflation to 3.1% in March 2026. The EBRD noted that the government partially offset rising fuel costs by reducing excise duties, though this increased fiscal pressure after the budget deficit reached 4% of GDP in 2025 and public debt exceeded 60% of GDP.

Other institutions have also revised Montenegro’s outlook. The European Commission recently lowered its 2026 growth forecast to 2.8% from 3.1%, while the World Bank cut its projection to 2.9% from 3.2%.

The EBRD also said it now expects the wider Western Balkans region to grow by 2.9% in 2026, down by 0.2 percentage points from its previous forecast. This still represents an improvement from 2.6% growth in 2025, with regional expansion expected to accelerate to 3.5% in 2027.

The Western Balkans region includes Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Serbia, and Montenegro.

This year, the EBRD expects Kosovo to lead regional growth at 3.5%, followed by Albania at 3.4% and North Macedonia at 3.0%, while Serbia and Bosnia and Herzegovina are projected to grow more slowly at 2.8% and 2.4%, respectively.

News.Az 

By Nijat Babayev