April 2012
Business Environment in Montenegro Prepared by: Mr. Darko Konjević, Montenegro Business Alliance (MBA) The first quarter of 2012 has continued to show negative trends in the Montenegrin economy. Problems with liquidity and debts were exacerbated by extreme weather conditions during the whole month of February, and this further contributed to the slowing down of economic activity. Problems with the repayment of guarantees provided for the Aluminum plant remained an issue; it also continued to affect the overall stability of the Montenegrin economy. The Ministry of Finance announced that a review of the budget will probably take place in April. This is due to the fact that expected income was not recorded and expenses were higher than planned. Also it was announced that new taxes would be introduced, particularly taxes relating to the use of cell phones, electricity and cable TV. This quarter was not characterized by any significant changes in legislation. However, representatives of the Social Democratic Party proposed a new law to set deadlines for payments. The main reason for proposing this law was that liquidity issues are generally related to late payments. The draft law proposes that payments should be made within 30 days of purchases or services provided, and that there should be an option to extend the deadline for up to 60 days if desired. In the case that companies are listed as small companies, according to the Law on Accounting and Auditing, deadlines for payments can be extended for up to 90 days. This law applies to both public sector and private companies. If the new law is adopted, all companies and public sector institutions will suddenly appear in the list of debtors which will be submitted to the tax authorities. The tax authorities are responsible for ensuring that the law is adhered to. The penalty for not obeying the law is at the minimum level €1,000 or between 5% and 10% of the contract. This law is still being debated and its adoption is pending. The average earnings (gross) in Montenegro in February 2012 were €739, while the average earnings without taxes and contributions (net) were €495. If we compare the average wage in Montenegro to the neighboring countries we can see that the highest net average wages are in Slovenia €1,000 and Croatia €800 while the lowest is in Serbia €330. In other countries the level of net wages is as follows: Albania and Macedonia €380, Bulgaria €390, Bosnia and Herzegovina €450 and Romania €480. Montenegro’s total external trade during the period January-December 2011, according to final data, was €2,277.7 million, which indicated a growth of 14.6% in comparison with the same period of last year. Exports amounted to €454.4 million, which was an increase of 37.5% in comparison with the same period of last year. Imports totaled €1,823.3 million, an increase of 10% when compared with the same period of last year. The coverage of imports by exports was 24.9%; an increase when compared with the coverage level for the same period of last year which was recorded as 19.9%.
The structure of exports, in accordance with the SITC (Standard International Trade Classification), showed that the most highly represented products were manufactured goods. These were classified mainly by material (Section 6), and were worth a total of €219.4 million (which was made up of: non-ferrous metals worth €182.4 million and iron and steel worth €27.4 million). The structure of imports, in accordance with SITC classification rules (Standard International Trade Classification), showed that the majority of products belonged to Section 0 – food and live animals worth €351.9 million. This was made up of: meat and meat products worth €74 million, and cereals and cereal products worth €57.1 million. The main trading partners for exports on an individual basis were: Serbia (€79.8 million) Hungary (€76.9 million) and Croatia (€45.9 million). The main trading partners for imports on an individual basis were: Serbia (€514.5 million), Greece (€144.7 million), and Bosnia and Herzegovina (€142.5 million). The highest volume of external trade was carried out with CEFTA and with various EU countries.
The second quarter of 2012 will be characterized by adjustments made to improve the current economic situation; the Government will make adjustments to the budget in a review that has been announced for April. Further budget cuts may still be made in the area of expenses in order to finance unexpected costs that may arise during this period. The Ministry of Finance has announced that it does not expect at this point to increase taxes (VAT, personal income tax and corporate profit tax).
Business Environment Macroeconomic Outlook Capital Market Banking Sector Privatization and Investments Economic Freedom Business News In the Spotlight Coming up... Business Statistics and Data Business Registration Statistics (Number of registered companies in Montenegro, as of 1st April, 2012)
357
Joint Stock Company Limited Liability Company
25,921
Part of a Foreign Company
434
General Partnership
61
NGO
293
Limited Partnership
434
Entrepreneur
16,982
Institution
1,114
Other
110
Total
45,706
Tax Rates 17%, 7% and 0%
Value Added Tax Corporate profit tax
9%
Personal income tax
9%
Source: Commercial Court
Economy Statistics Selected indicators
Population (625,082 in 2003)
2011
2012
625,266
Real GDP (billion)*
3.273
3.386
Real GDP growth*
2.5%
3.5%
Inflation rate (average annual CPI) 2011/ Jan-Feb 2012
0,1%
Unemployment rate 2011/ March 2012 Net FDI (million) 2011
4,2%
11.56 % 13,58% 389
no data
* Ministry of Finance Bulletin, Data Base, Estimates Official currency
Euro
Source: Ministry of Finance, Central Bank of Montenegro, Monstat, Montenegrin Investment Promotion Agency (MIPA), Employment Agency of Montenegro
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