Inflation rate for Montenegro lower than expected

15/02/2006

Montenegrin Central Bank chief economist Nikola Fabris estimated late last year that 2005 would end with one of the lowest inflation rates in the region. Statistics show his predictions were correct.

By Antonela Arhin for Southeast European Times – 15/02/06

Montenegro enjoyed the region's lowest inflation rate in 2005. [File]

The 2005 inflation rate in Montenegro, which was predicted to be the lowest in the region, was reported by the Montenegrin Statistics Bureau last month to be 1.8 per cent -- even lower than expected. The cost of living in the country, however, increased by 2.3 per cent compared to the previous year.

The statistics bureau also reported that salaries of Montenegrin workers rose by 6.7 per cent in real terms during 2005, while the average net wage increased by 9 per cent compared to 2004.

The data confirms the optimistic projections made by Montenegrin Central Bank chief economist Nikola Fabris late last year. In a report covering the first nine months of 2005, he forecast annual inflation between 1.9 to 2.7 per cent. According to Fabris, the year saw increased growth in industrial production, tourism, forestry and architecture. Retail prices have been on the decline, while GDP rose 3.8 per cent from January to November -- and was reported at a 4 per cent increase for the year.

With interest rates falling and foreign direct investments increasing by almost sixfold, Montenegro has met all the Maastricht criteria, Fabris said. The macroeconomic situation is considered auspicious. In September, all monetary indicators reached their highest point since the introduction of the euro.

As for the banking sector, citizens' savings grew by 122.5 per cent, and deposits by 59 per cent in the past year. Imports increased by 10.7 per cent compared to 2004, while exports fell by 7.5 per cent. A decrease in steel production affected this balance, Fabris said. The year saw fewer imports of food, animals, chemical products, drinks and tobacco, and more imports of mineral fuel and cars.

Montenegro's figures are a stark contrast with those of the federal union. Serbia-Montenegro recorded an inflation rate of 15.6 per cent in 2005, much higher than the projected 9.3 per cent. Although GDP was up by 5.1 per cent, living costs were even higher, rising 15.2 per cent. Experts believe that the inflation rate in Serbia-Montenegro will remain in the double digits for 2006 despite the official prediction of 9.3 per cent.

The two constituent republics of Serbia-Montenegro have separate economies. Montenegro will be holding a referendum later this year on a complete breakaway from the federal union, which replaced the former Yugoslavia three years ago