Montenegro Economic Outlook
Following an acceleration in year-on-year GDP growth in Q1, momentum seemingly waned in Q2. Merchandise exports and industrial production both contracted, on average, in the quarter. Moreover, merchandise imports growth cooled, hinting at weaker domestic demand. More positively, inflation fell notably. Moving to the current quarter, a sharp rebound in merchandise imports and a further decline in inflation in July bode well for activity. In politics, in mid-August, President Jakov Milatovic nominated Milojko Spajic, leader of the pro-European Europe Now Movement, as prime minister-designate with a mandate to form a government. On 26 August, Spajic announced that he had reached an agreement with several parties, giving him the support of 44 MPs in the 81-seat parliament. He has until 10 November to get parliamentary approval.
Inflation fell to 6.9% in July from June’s 7.5%, marking the lowest print since February 2022. Softer increases in prices for food, clothing and footwear, and housing and utilities, as well as a sharper decline in transport prices, drove the result. Inflation will continue to slow but remain high ahead this year amid protracted pass-through effects.