Montenegro is navigating a complex economic landscape, marked by a downward revision of its 2025 GDP growth estimate and significant concerns surrounding its vital tourism sector. While some areas like Budva have seen record visitor numbers, the broader picture reveals infrastructure strains, economic pressures, and controversial agreements that could impact the nation’s EU accession.

Montenegro’s Economic Outlook Shifts

Montenegro’s Ministry of Finance has adjusted its 2025 GDP growth forecast downward to 3.5%. This revision comes amidst broader economic challenges and a re-evaluation of the country’s financial trajectory. The nation faces significant climate risks, including floods and earthquakes, which could reduce GDP by 7.9% by 2050 if not addressed. Adapting to climate change would require an estimated $5.7 billion over the next decade.

Tourism: A Tale of Two Realities

Montenegro’s tourism sector presents a mixed picture, with both successes and significant challenges.

  • Budva’s Boom: Budva, a key coastal destination, reported over 30,000 visitors, a 3% increase from the previous year. Foreign tourists constitute the vast majority, with 29,441 international visitors. Hotels saw a 6% rise in guests, while private accommodations remained stable. This growth highlights Budva’s strong international appeal.
  • Wider Concerns for 2025: Despite Budva’s success, the overall tourism outlook for 2025 is grim. Reports indicate empty beaches, significant traffic congestion on routes like Tivat-Budva, and lower-than-expected hotel occupancy rates across the country. Tourists are reportedly cutting trips short due to frustrations with infrastructure and service. This downturn is impacting local businesses and the national GDP, which heavily relies on tourism.

Infrastructure and Governance Challenges

The tourism crisis is exacerbated by long-standing issues in infrastructure and governance.

  • Aging Infrastructure: Montenegro’s roads and transport systems are struggling to cope with peak season demands, leading to severe congestion and frustrating tourist experiences. This also hampers local commerce.
  • Government Mismanagement: The Public Enterprise for Coastal Zone Management has faced criticism for inefficiency, lack of transparency, and poor decision-making. Delays in public tenders, bureaucratic inefficiencies, and a lack of strategic long-term planning are cited as contributing factors to the tourism decline. Increased VAT rates and inflation further deter visitors.
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Controversial UAE Agreement and EU Accession

A recently ratified agreement between Montenegro and the UAE concerning tourism and real estate development has raised significant concerns from Transparency International.

  • Exemptions from Public Procurement: Article 2.4 of the agreement exempts contracts with UAE investors from public procurement, tender, and competition laws. This allows for direct contract awards without competitive bidding, potentially undermining transparency and fair competition.
  • Threat to EU Accession: Transparency International warns that these exemptions could jeopardize Montenegro’s EU accession process, particularly concerning Chapter 5 on Public Procurement. Such provisions directly conflict with EU public procurement laws and the Stabilisation and Association Agreement (SAA) between Montenegro and the EU. The European Commission has also highlighted these potential breaches.
  • Corruption Risks: The lack of transparency and anti-corruption safeguards in the agreement increases the risk of favoritism and misuse of public funds, contravening principles of good governance essential for EU integration.

Path Forward

To revitalize its economy and tourism, Montenegro needs to address these multifaceted challenges. This includes significant investment in infrastructure, improving service quality, adopting sustainable tourism practices, and ensuring that international agreements align with EU standards and anti-corruption principles. Calls for decentralization of tourism management are also emerging as a potential solution to improve efficiency and responsiveness.

Sources

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Emre Emehet
Emre Emehet
Emre Emehet is a 45-year-old journalist from the Balkans, best known for his dedication to telling stories that reflect the everyday lives of people in his region. Growing up in a small town in northern Bosnia, Emre always had an interest in local history and storytelling, which drew him to pursue a degree in journalism and communications at the University of Sarajevo. He wasn’t the top of his class, but his professors admired his practical approach and natural curiosity, qualities that would later define his career.

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