November 15, 2018 - After developing a credible fiscal strategy, the Montenegrin government should adhere to the set goals, even if it slows down the economic growth, in order to restore fiscal balance and reduce public debt, it was suggested by the European Bank for Reconstruction and Development (EBRD). The EBRD in its new Transition Report (2018-2019) states that fiscal stabilization is crucial for the economic growth.
"The sustainability of public finances is a significant concern and among the greatest risks facing the country. In the fight against ever-increasing fiscal pressures, a new Fiscal Strategy was adopted in June 2017, which contained a series of measures, including VAT and excise tax, official’s salary cuts, improvement of tax collection and the abolition of maternity allowances with three or more children, adopted by the Parliament a year earlier. The main goal of the Strategy is to achieve the primary budget surplus from 2019 and the overall budget surplus from 2020. This should set the public debt to a declining path, which has rapidly increased to more than 70 percent of GDP in the recent years," the report said.
It is added that renewable energy projects should be further developed because Montenegro has significant potential in this area and further development would help the transition towards the green economy.
"Further improvements are needed in the management. The focus in the coming years should be the development of the Government's e-governance program and strengthening the framework for competitiveness policy," it was stated from the EBRD.
In the previous Transition Report, for 2017-2018, the EBRD released a new approach to measuring transitional progress. According to EBRD, a sustainable market economy must be: 1) competitive, 2) well-managed, 3) "green", 4) inclusive, 5) external shock resistant and 6) integrated. At the same time, the bank has developed a methodology according to which each of the countries in transition, on a scale of 1 to 10, is being evaluated in relation to the six listed qualities. Montenegro got the worst rating for competitiveness, 5.2, the green economy 5.3 and good management 5.9. Montenegro has received slightly better grades for the integrated economy, 6.4, for resistance to external shocks 6.3 and for inclusive economy 6.1.
All countries in the region have poor competitiveness scores, and the main reasons that negatively affect the competitiveness of the countries in the region are inadequate business environment, strong unfair competition coming from the gray economy and limited and often expensive approach to financing (especially for small and medium-sized enterprises).
After several years of relatively weak economic results, growth in the EBRD region in 2017 was on average 3.8 percent, which is the second consecutive year of faster growth.
"The economies in which the EBRD operates have very different rates of population and labor growth, which means that the relationship between productivity growth, wage growth per capita and main economic growth - three concepts that are often used as synonyms - are actually more complex and more specific per the country itself, "the report said.
The EBRD stresses that Montenegro has made progress towards eventual membership in the EU.
Text by Vijesti online, on November 14th, 2018, read more at Vijesti
