17.11.2025
Domestic demand is projected to remain the main driver of economic growth in Montenegro over the forecast horizon. Real GDP growth is expected to stay broadly stable at around 3% in 2025-27, supported by the Europe Now 2.0 programme and continued large infrastructure projects, while exports are forecast to recover gradually as electricity production normalises. Inflation picked up in 2025 due to domestic price pressures, but is expected to moderate in 2026-27 under unchanged policies. The general government deficit is projected to exceed 3% of GDP throughout the period, and gross public debt is forecast to rise to above 60% of GDP by 2027.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 3.0 | 3.1 | 3.1 |
| Inflation (%, yoy) | 3.8 | 3.2 | 2.8 |
| Unemployment (%) | 10.8 | 10.6 | 10.3 |
| General government balance (% of GDP) | -3.5 | -3.3 | -3.2 |
| Gross public debt (% of GDP) | 60.6 | 62.5 | 64.4 |
| Current account balance (% of GDP) | -17.1 | -17.4 | -17.2 |
Domestic demand drives GDP growth
Real GDP growth was revised up to 3.2% in 2024 and the economy expanded by 3.1% y-o-y in the first half of 2025, driven by strong investment and robust private consumption supported by higher disposable income and credit expansion. The temporary closure of the Pljevlja thermal power plant and muted tourism performance weighed on exports, while imports remained firm, leading to a negative external contribution to growth. Over 2025-27, growth is expected to remain close to 3%. The Europe Now 2.0 programme and continued infrastructure investment are set to support consumption and investment in 2025, with the impact on consumption easing thereafter. Exports are projected to recover gradually in 2026-27 with the reopening of the power plant, while tourism growth is expected to remain moderate. Large current account deficits are set to persist, mainly reflecting strong import demand.
Improving labour market situation
Employment gains continued into 2025, supported in part by declining informality linked to the implementation of the Europe Now 2.0 programme, and the unemployment rate fell to a new record low in 2025-Q2. Employment growth is expected to continue but to decelerate in 2026-27 as higher wages are likely to weigh on job creation in the services sector.
Domestic policy measures contribute to resurging price pressures
Inflation accelerated over the course of 2025, driven by higher prices for health services, accommodation, catering and alcoholic beverages, alongside domestic price pressures stemming from higher wages. Inflation is expected to moderate in 2026-27 under the assumption of unchanged policies, though risks to the outlook remain tilted to the downside amid global uncertainty and the possibility of a slower-than-expected export recovery.
Budget deficits to persist
The revised budget targets a deficit of 3.5% of GDP in 2025, and the general government deficit is projected to remain above 3% of GDP in 2026-27 in the absence of additional consolidation measures. Public debt is projected to increase gradually, driven by persistent deficits, while the fiscal risk balance remains tilted to the downside due to reliance on consumption taxes and high mandatory spending.
Source: European Commission. European Economic Forecast, Autumn 2025.
