Montenegro - Market OverviewMontenegro - Market Overview
Since regaining independence in 2006, Montenegro has adopted an investment framework to encourage growth, employment, and exports. Although the continuing transition has not eliminated all structural barriers, the government recognizes the need to remove impediments, ensure business-friendly policies and improve transparency and open the economy to foreign investors.
Montenegro makes no distinction between domestic and foreign companies. Foreign companies can own 100 percent of a domestic company, while profits and dividends can be repatriated without limitations or restrictions. Exceptions to this policy are the small number of cases dealing with defense-related industries.
Montenegro has been committed to membership in Euro-Atlantic alliances. The country joined NATO in June 2017, and as a candidate country on its path to joining the European Union (EU), Montenegro has opened 32 out of 33 negotiating chapters, with three chapters provisionally closed. It is expected that the final chapter will be opened in 2019.
Montenegro offers foreign investors low, fixed tax rates, a business-oriented economy, significant economic freedom, a stable currency (Euro), and openness to incentivize investors. Montenegro is a beneficiary of the Generalized System of Preferences program, which provides duty-free access to the U.S. market in various eligible categories. The Euro is the official currency in Montenegro, which stabilizes financial flows and results in lower transaction costs. This is an informal arrangement with the European Central Bank, and Montenegro is not part of the Euro Zone. Private ownership is protected by the Constitution and includes equal treatment of foreigners. The IMF has cautioned Montenegro that its economic system is vulnerable to external shocks due to its high public debt-to-GDP ratio. Montenegro’s public financial situation is relatively weak, with a debt-to-GDP ratio of 70.9 percent, with forecasts of growing indebtedness based on projected infrastructure development needs.
Montenegro has favorable tax regime with the lowest corporate tax rate in the region at nine percent; in April 2019, Moody’s affirmed Montenegro’s B1 credit rating and stable outlook, supporting the implementation of economic reforms For 2018, Montenegro’s economy grew by 4.9 percent while the unemployment rate was 15.2 percent.
Montenegro attracts considerable interest from foreign investors. According to data released by the Montenegrin Investment Promotion Agency (MIPA), EUR 8.8 billion have been invested in Montenegro since 2006 with a total inflow of FDI in 2018 of EUR 843.1 million. Montenegro is a leading country in FDI, as measured by investment per capita in the region and since 2006 has averaged around 15 percent of GDP.
No one country dominates foreign direct investments. The most significant investments have come from Italy, Hungary, Russia and Serbia, with new interest coming from the United Arab Emirates, Azerbaijan, China, Turkey and the United States.
On January 1, 2019, Montenegro launched its economic citizenship program, designed to attract a maximum of 2,000 investors from 2019 to 2021. Preliminary estimates suggest the program could bring as much as $1 billion in infrastructure investments to the country.