Inflation in Montenegro Hits 4.9% Amid Economic Concerns

The annual inflation rate in Montenegro reached4.9% in September, reflecting a significant increase from 2.6% in March, according to data from Monstat. Economic analyst Mirza Mulešković highlighted that this trend is unsurprising given the government’s fiscal management practices, which have historically led to rising prices.

Mulešković noted that the hikes in administrative wages and taxes without considering productivity have consistently resulted in price increases. He pointed to the inflation peaks in 2022, which were influenced by both local reforms and global factors, leading to rates reaching as high as 20% in some months. Currently, he assesses that the situation has stabilized, although the inflationary pressure remains predominantly internal.

“Montenegro has so far fared relatively well, largely avoiding the energy crisis that has plagued many nations. If electricity prices had risen, the current inflation rate would be significantly higher,” Mulešković explained. He further stated that while the European inflation average hovers around 2.2%, Montenegro’s inflation is almost double that figure, underscoring the impact of national policies on price stability.

Government Measures Lack Concrete Support

The government has projected an average inflation rate of 4% for the year in its fiscal strategy. Mulešković criticized the measures implemented to increase wages and taxes as fundamentally inflationary, contributing to further price escalations. He emphasized the absence of substantial support measures for the real economy and the promotion of domestic products, which he believes are crucial for combating inflation.

Since the onset of inflationary issues in 2022, Mulešković argues that there has been a lack of effective measures to bolster local production. He believes that had the government prioritized support through subsidies earlier, it could have had a more favorable impact on prices today.

When questioned about the €3.5 million invested in supporting domestic production this year, as mentioned by Minister of Economic Development Nik Đeljošaj, Mulešković pointed out that the current scenario reveals mismanagement in the economy. He cited issues like local dairy farmers discarding milk due to unsold stock, highlighting the need for systemic changes to assist domestic producers.

Focus on Domestic Products and Cost Rationalization

Mulešković stressed the importance of concentrating on Montenegrin products, advocating for technological improvements and increased production capacity along with better marketing strategies. He noted the irony that even local restaurants do not serve Montenegrin water despite the country’s high-quality offerings.

He called for rationalizing public administration costs and reallocating those funds to enhance competitiveness in the domestic market. “A return to a real economy focused on production is essential for generating wealth in society,” he concluded.

While Mulešković acknowledged the short-term benefits of inflation for public finances—citing its role in filling the budget—he warned that it is ultimately detrimental to citizens. “Inflation may seem beneficial now, but it will become a significant adversary if consumer spending declines,” he cautioned.

During a recent parliamentary hearing, Deputy Prime Minister and Minister of Economic Development, Nik Đeljošaj, stated that inflation in Montenegro is predominantly driven by imports. He emphasized that without increased allocations for the agricultural budget and support for local competitiveness, the country would continue to face recurring economic challenges.

Đeljošaj expressed commitment to supporting domestic production through competitive programs and noted that this year’s funding for the food industry totals approximately €3.5 million. He indicated that future budgets may increase this support to €30 million, aiming to improve the visibility of domestic products and potentially reduce VAT on fruits and vegetables.

The ongoing discussions surrounding inflation and economic policy in Montenegro highlight the need for strategic, systemic changes to foster a resilient economy and sustain local production capabilities.