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World > Europe > Montenegro > Economy (Notes)

Montenegro - Economy (Notes)


ECONOMY
Montenegro has natural resources, primarily bauxite, adequate water supplies, and a climate conducive to agriculture and tourism. The establishment of the bauxite-alumina-aluminum industry after World War II provided Montenegro with a core strategic industry, which has suffered from high production costs since the first energy crisis in 1973. In the 1960s, tourism began its initial growth, largely attracting visitors from Eastern Europe. War and sanctions in the early 1990s hit Montenegro hard, and recovery only really began after the end of the Kosovo crisis in 1999 and the adoption of the deutschmark (DM) in November 1999, which largely disconnected Montenegro's economy from Serbia and the Serbian dinar.

During the last few years, Montenegro has created a business-friendly investment climate. The Euro replaced the DM on March 31, 2002. The country established the lowest corporate tax rate in the region (9%) and Standard & Poors has given Montenegro a credit rating of BB+. In 2006 inflation was 2.5%, and, according to the cost of the living index, the inflation rate in the first half of 2007 was only 1.1%. Around 85% of capital value in Montenegrin companies had been privatized by December 2006. The banking sector, telecommunications, and oil import and distribution in Montenegro are 100% privately owned. Capital structure analyses show that the state still has shares in 65 companies, and in 53.8% of those the state has more than 50% ownership.

The biggest improvement Montenegro has made has been in the area of tax policy. Montenegro introduced value added tax (VAT) in April 2003, and, as of January 2006, introduced the tax rates of 17% and 7% (for tourism). The lower VAT rate for tourism is to encourage growth in this strategic industry. Montenegro also decreased the personal income tax (PIT), and a 15% flat rate has been implemented since January 2007.

Net foreign direct investment (FDI) in 2006 reached $680 million, which was six times higher than in 2004, and investments per capita are $1,100--one of the highest in Europe. In the first half of 2007 there was a 78% increase in direct foreign investments in Montenegro. According to preliminary data from the Montenegrin central bank, the amount of foreign investments from January to July 2007 was $650 million.

Tourism and tourism investments, particularly along the Adriatic coast, are booming. The independent World Travel and Tourism Council repeatedly has ranked Montenegro as the top-growing tourism destination in the world, with growth estimated at 10% annually through 2016.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Ranking Positions - Euro Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Ranking Positions
Euro Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Foreign Relations
Relations with U.S.





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