Montenegrin economy: issues and possible solutions

According to the latest statistics for Montenegro in 2018, the percentage of unemployment rate shows a decrease from 17.7% to 16.1% in 2017. The authorities explain this by stronger investment, and they believe that things can even get better than that. Also, the latest statistics show 0.7% higher share of the people looking for jobs in 2017 than in 2016, and the number of economically inactive went down. Like in many other countries recession has deeply influenced the unemployment rate, and low economic activity resulted in the decrease of jobs. Employers don’t want to open new job positions cause they fear the failure of business; on the other hand, credit rates are very high, so the development of entrepreneurship is very slow. Another major problem is the inadequate educational structure, and that can easily be noticed on the example of seasonal jobs. The labor market in Montenegro offers seasonal jobs during the summer months, but the problem is that every third worker is from Montenegro, so the statistics show a larger number of foreign than domestic workers. Another issue is the disbalance between the major market and the education policy. Most of the high school students continue their education, but the number of the unemployed young people with the university degree is very high, and that’s how Montenegro created ‘a lost generation’.

Poverty issue

Like many other East European countries, Montenegro deals with poverty. This problem is not as severe as in some other countries, but it’s still very serious. Last year’s statistics show that 48.3% of children live in extreme poverty in households in which not a single family member is employed, or where income sources are not stable. In addition, many private employers don’t provide their workers with insurance or it often happens that they don’t pay them for their work. So, these poor people are forced to turn to welfare and entitlement programs but again they are available only to a certain number of people and that financial help is not sufficient to support a family’s needs. The line of poverty is $169 and UNICEF states that there is 10% of children who live below this line, not having access to bare necessities. However, the government has positive expectations related to employment and believes that the unemployment rate will be decreasing to reach 16.6% by the end of 2019. with the help of grant programs. It’s very important that Montenegrin government revises its goals if it wants to reduce the poverty within the country.

Brain drain

Although Montenegro is placed better than some other countries in the region (Serbia or Bosnia, for example), it doesn’t mean that they can be proud of the situation on the labor market. IMF’s report warns about the risks that Montenegrin economy in 2018 may face. Although it can be competitive with the new EU members, hardly can it be compared to the EU average, and it’s marked as the country with the sharpest rise in poverty since 2008. The sign that indicates the labor market inefficiency is the emigration of highly educated people. According to Montenegro’s population statistics, there is 6.2% of highly educated people living abroad.

Possible solutions

The government came up with an action plan in 2015 in order to solve the alarming situation on the labor market – economic inactivity, the causes of brain drain and the unsatisfactory entrepreneurship incentives. Brain drain in Montenegro is characterized by two-fold brain drain phenomenon: one that is related to foreign counties, and the other that causes the imbalance within the very country (people migrating from the north to the south and central parts for seasonal, short-term jobs). The government must synchronize the labor market demands with the adequate education and skills. Unfortunately, resources and research activities are scarce due to inaccessible data, academic materials, outdated methodology and data processing. Another reason why young people decide to leave the country is the politicization and nepotism that must be eradicated in order for the unemployed youth to get jobs easier and be motivated to look for them in their own country. Despite the tough situation on the market, there have been some efforts to improve it with some scientific and research activities within national and bilateral projects. However, the government must be aware that their moves must show quality not quantity in order to see the results of improvement in the implementation of problem-solving mechanisms. Their administration must do everything it can in order to develop human capital and strengthen youth by removing barriers to proactive and creative action.

Prospects for the future

As for the future of Montenegro’s economic growth and Montenegro’s GDP, the World Bank predicts that in 2019. GDP will grow by 2.5%. The economy is expected to grow 3.2% in the period between 2017-2019 due to personal consumption and investments, and the highway construction Bar – Boljare will slow down. The inflation for the same period is expected to be 2% and to reach balance next year, and then slowly head towards surplus by 2022. Despite the positive economic outlook, the government must find a way to regain control of public finances and facilitate access for women to the labor market. They should also start implementing the adopted fiscal consolidation in order to convey the refinancing in the mentioned period.

Finally, travel and tourism have played an important role in Montenegrin economy and they brought to its general growth and improvement. Today, it makes 25% of GDP and experts say that this percentage can only grow further. Tourism is, by all means, a tool for sustainable, smart and balanced growth and its benefits are distributed both geographically and socially. That’s why Montenegrin authorities must come up with innovative and comprehensive strategies in order to maintain flexible approaches to adapt to ever-changing circumstances and emerging trends. Although tourism facts show that Montenegro has one of the fastest rates of tourism growth in the world, the challenge for the authorities is not only to maintain that growth but to enable balanced and immediate benefits to their citizens along with preserving and protecting the natural resources.