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Europe > Montenegro

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Cover IMF Staff Country Reports
Montenegro: Staff Report for the 2014 Article IV Consultation
International Monetary Fund. European Dept.
KEY ISSUES Context: Moderate growth is continuing; however credit and wage growth are weak. The level of nonperforming loans (NPLs) remains high and public debt has risen sharply in recent years. Fiscal policy: Medium-term funding needs to roll over existing debt and to fund budget deficits are large. A new highway, budgeted to cost about one quarter of GDP, will cause deficits to widen and add to public debt. The draft 2015 budget shows appropriate restraint on other spending, but a long period of strong fiscal discipline will be needed to manage fiscal risks. Laying out clear long-term plans for managing the public finances would boost credibility and reduce risks to market access. Fundamental expenditure reform, especially of the pension system and the public sector wage bill, would be an essential part of such plans. Financial sector: The banking system’s liquidity appears comfortable; however, profitability is low and lending spreads are high. Regulatory provisioning is set higher than that reported under international accounting standards, but a wide range of provisioning levels across banks and weak incentives to take losses remain concerns. A more transparent and comprehensive reporting environment would be beneficial. Reforms to ensure better enforcement of contracts and collateral would help bring down structural lending risk premia. Structural reform: Higher levels of labor participation and employment are needed to boost potential growth and safeguard the public finances. Ensuring that wages adjust in line with productivity alongside reforms to achieve better employment outcomes and boost productivity would enhance the economy’s ability to respond to macroeconomic shocks, and are even more important in a country that lacks its own currency and with decreasing fiscal buffers.
Keywords:
ISCR; CR; authority; growth potential; public-sector wage bill; growth; banking system health indicator; Montenegrin authority; credit condition; financial asset; Loans; Current account balance; Income; Personal income; Global; Eastern Europe
Cover IMF Working Papers
Does Supply or Demand Drive the Credit Cycle? Evidence from Central, Eastern, and Southeastern Europe
Greetje Everaert
,
Ms. Natasha X Che
,
Ms. Nan Geng
,
Bertrand Gruss
,
Gregorio Impavido
,
Miss Yinqiu Lu
,
Christian Saborowski
,
Mr. Jerome Vandenbussche
, and
Mr. Li Zeng
Countries in Central, Eastern, and Southeastern Europe (CESEE) experienced a credit boom-bust cycle in the last decade. This paper analyzes the roles of demand and supply factors in explaining this credit cycle. Our analysis first focuses on a large sample of bank-level data on credit growth for the entire CESEE region. We complement this analysis by five case studies (Latvia, Lithuania, Montenegro, Poland, and Romania). Our results of the panel data analysis indicate that supply factors, on average and relative to demand factors, gained in importance in explaining credit growth in the post-crisis period. In the case studies, we find a similar result for Lithuania and Montenegro, but the other three case studies point to the fact that country experiences were heterogeneous.
Keywords:
WP; credit growth; demand and supply; credit demand; credit supply; parent bank; Credit; Eastern Europe; Disequilibrium Model; bank characteristic; excess supply; asset quality; excess demand; credit to household; demand and supply factor; bank funding; demand development; Consumer credit; Credit booms; Loans; Bank credit; Global; Baltics
Cover IMF Working Papers
Boosting Job Growth in the Western Balkans
Dmitriy Kovtun
,
Alexis Meyer-Cirkel
,
Ms. Zuzana Murgasova
,
Mr. Dustin Smith
, and
Suchanan Tambunlertchai
Labor markets in the Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia) are characterized by some of the highest unemployment and low employment rates in Europe. We analyze the poor labor market outcomes in these countries by comparison with the New Member States of the European Union and advanced European economies. Our findings suggest that long-lasting labor market weaknesses in the Western Balkans have structural roots: the institutional setup of the labor markets, labor cost factors, and especially the unfinished transition process. Finally, we offer policy recommendations for boosting job creation.
Keywords:
WP; labor market; unemployment benefit; Balkan countries; labor market outcome; labor market problem; Labor markets; The Balkans; natural rate of unemployment; Labor migration; cost factor; labor market challenge; labor market practice; labor market rigidity; practices in the Balkan countries; unemployment spell; labor-leisure decision; labor market performance; Unemployment; Labor costs; Wages; Unemployment rate; Europe
Cover IMF Staff Country Reports
Montenegro: 2013 Article IV Consultation
International Monetary Fund. European Dept.
This 2013 Article IV Consultation highlights that Montenegro’s recovery from the collapse of the lending boom in 2008 has been slowed by the debt overhang that remains in the private sector. Output contracted in 2012 because of unusually severe winter weather early in the year, as well as a sharp decline in aluminum production as the financial position of the troubled aluminum company (KAP) continued to worsen. Activity picked up in early 2013 as more favorable weather conditions resulted in a sharp increase in hydro-based electricity production. A sustained, multi-year fiscal consolidation effort is needed to reduce the public debt burden to an appropriately low level in the medium term.
Keywords:
ISCR; CR; debt; Montenegro; current account; private sector balance sheets; lending boom; labor market; sluggish private sector demand; financial asset; debt accumulation; Credit; Tourism; External sector statistics; Global
Cover IMF Staff Country Reports
Republic of Kosovo: Selected Issues Paper
International Monetary Fund. European Dept.
This Selected Issues paper on the Republic of Kosovo’s 2013 Article IV Consultation highlights growth and Kosovo’s external environment. In the wake of the global financial crisis, Kosovo’s economic growth slowed but remained positive, while most other Western Balkans slipped into recession. Moreover, the annual average growth rate has been among the highest in the Western Balkans since the onset of the financial crisis in 2007. Kosovo’s tax-to-GDP ratio is comparable to the average of Southeastern Europe, although its tax system relies significantly more on indirect taxation—including a high share of trade taxes. Kosovo’s reliance on trade taxes may create budgetary pressures in the event of further trade liberalization.
Keywords:
ISCR; CR; Kosovo; tax; trade; trade liberalization; FDI inflow; IMF BOP manual; trade tax; FX financing need; banking sector development; Taxes on trade; Trade liberalization; Remittances; Income and capital gains taxes; Global; Europe; Eastern Europe; Central Asia
Cover IMF Staff Country Reports
Republic of Slovenia: Financial System Stability Assessment
International Monetary Fund. European Dept.
and
International Monetary Fund. Monetary and Capital Markets Department
The Slovenian financial system has been hard hit by the crisis. Banks remained highly vulnerable to continued credit deterioration and refinancing risks. Strengthening of financial condition of banks should be the short-term priority. The financial restructuring should be followed by privatization of state-controlled banks. The supervision of financial institutions should be complemented with a macroprudential overview geared toward overall stability of the financial system. The crisis preparedness and management framework should be improved, and risks to systemic financial stability should be identified.
Keywords:
ISCR; CR; bank lending; resolution tool kit; bridge bank; bank borrowing; bank equity; bank resolution tool kit; banking system; state-controlled bank; bank assets; capital market; bank downgrade; bank subsidiary; bank-restructuring transaction; Commercial banks; Stress testing; Loans; Insurance companies; Real estate prices; Global
Cover IMF Staff Country Reports
Montenegro: Staff Report for the 2012 Article IV Consultation
International Monetary Fund
This 2012 Article IV Consultation highlights that three years after the sudden end of Montenegro’s boom, there has been considerable progress toward recovery. Fiscal imbalances have proved difficult to rein in, reflecting a large fall in revenue after the collapse of the boom. Executive Directors have commended the authorities’ efforts to stabilize the economy, and welcomed the progress made since the financial crisis. Directors have also recognized the sizable public expenditure adjustment over the past few years, but underscored the need for further high-quality deficit reducing measures.
Keywords:
ISCR; CR; commercial bank loan; staff appraisal; IMF staff representative; financing risk; deficit; privatization contract; Loan guarantees; Labor markets; Europe; Global
Cover IMF Working Papers
Fiscal Consolidation in Southeastern European Countries: The Role of Budget Institutions
Mr. Brian Olden
,
Mr. Duncan P Last
,
Mr. Sami Yläoutinen
, and
Ms. Carla Sateriale
This paper assesses the relative strengths and weaknesses of fiscal institutions in ten Southeastern European countries, using recent benchmarking methodologies developed by FAD. The assessment evaluates each country’s understanding of the scale of the fiscal adjustment challenge, its ability to develop a credible consolidation strategy, and its capacity to implement the strategy. Key institutional arrangements, are generally in place, including top-down budgeting and medium-term budget frameworks. Other institutional arrangements require further attention, including macro-fiscal forecasting, fiscal risk analysis, setting fiscal objectives, presence and role of independent fiscal agencies, and top-down parliamentary approval.
Keywords:
WP; European country; budget institution; annual budget; consolidation strategy; orientation debate; Southeastern Europe; Fiscal Consolidation; Budget Institutions; consolidation program; nonfinancial enterprise; policy action; Budget planning and preparation; Fiscal risks; Macroeconomic and fiscal forecasts; Budget execution and treasury management; Eastern Europe; Europe
Cover IMF Working Papers
Inclusive Growth, Institutions, and the Underground Economy
Mr. Adil Mohommad
,
Mr. Anoop Singh
, and
Ms. Sonali Jain-Chandra
Worldwide protests against the perceived lack of economic opportunity and failure of governance have refocused attention on the need for inclusive growth and strong institutions. In developing countries, large informal economies limit state capacity to deliver governance and strong institutions, which in turn discourages participation in and expansion of the formal economy. This paper analyzes the determinants of the underground economy, with particular emphasis on the role of institutions and the rule of law. We find that when businesses are faced with onerous regulation, inconsistent enforcement and corruption, they have an incentive to hide their activities in the underground economy. Empirical analysis suggests that institutions are a more important determinant of the size of the underground economy than tax rates.
Keywords:
WP; economy; underground economy; shadow economy; economic activity; institutions; IFS database; shadow economy rise; size of the shadow economy; informal economy limit; unofficial economy; Informal economy; Global
Cover IMF Working Papers
The Impact of the Global Crisison South-Eastern Europe
Francesco Spadafora
,
Mr. Emidio Cocozza
, and
Mr. Andrea Colabella
This paper analyzes the impact of the global crisis on six South-Eastern European countries. The main objective is to compare macro-financial conditions and policies in the run-up to the crisis as well as to compare the policy responses to it, so as to highlight, inter alia, possible country-specific constraints. While sharing a common pre-crisis pattern of strong capital inflows and robust growth, a key difference in the conduct of macroeconomicpolicies is that some countries adopted expansionary (and procyclical) fiscal policies. These moves exacerbated external vulnerabilities and compromised the ability to discretionarily use the fiscal instrument in acountercyclical fashion.
Keywords:
WP; current account; budget deficit; foreign currency; financial support; core inflation; international capital flows; current account adjustment; IMF financial support; FYR Macedonia; transmission mechanism; short-term debt; Current account deficits; Budget planning and preparation; Government debt management; Global; Western Europe