Bleak times for Montenegro's economy
07/06/2010 With rising costs, stagnating wages and a slowdown in foreign investment, Montenegro's economic situation is steadily deteriorating. By Nedjeljko Rudovic for Southeast European Times in Podgorica – 07/06/10 A construction site stands idle in Budva. [Getty Images] According to Montenegro's Ministry of Finance, the country's GDP declined by 5.3% in 2009, but according to the IMF assessment, the decrease was 7%. Given that the government has chopped wages in the public administration by 30%, Montenegrins are facing a bleak picture. Doctors and teachers now receive about 400 euros per month. Police officers and soldiers get about 300 euros. Meanwhile, the cost of living is up: rent for a small apartment in Podgorica is about 200 euros a month -- making it difficult for many to make ends meet. In addition, some workers have not received salaries for months. Economic experts say that one of the main problems is that the economy hasn't developed its manufacturing and export-oriented enterprises. Additionally, huge public spending -- a result of the bulky administrative apparatus -- remains a problem. "Micro, small and medium enterprises in the areas of organic food production, processing of wood, stone, water production, forest and sea products and the service sector should be kept under special attention. Special treatment in the near future needs to [include] the tourism sector, with marine business for multiplicative effects in the long run," Investment and Development Fund Chairman Dragan Lajovic says. The fund was established by the government last year to spur economic development. Foreign investment has also dwindled. From 2006 to 2008, there was a huge demand from people in Russia and Great Britain for property on the Montenegrin coast -- but no more. Last year, several seaside projects had to be halted midway due to lack of funding. "Exit from the crisis includes … a package, which should be based on opening the economy to foreign investment, thus making positive multiplicative effects," Lajovic said, including job creation. He warns that foreign capital requires fertile soil, and Montenegro is not the only destination that is suitable. One problem, however, is that banks in the country significantly curbed lending last year. "There are currently only 59 companies that Montenegrin banks will provide credit support to, which is a devastating fact," Central Bank Chief Economist Zorica Kalezic told SETimes. Montenegro's Central Register showed that there were 51,505 companies in the country at the end of April. 19/03/2010 Since banks will not give loans, employers warn that they will have to lay off workers. The current unemployment rate is 12.4%. The actual rate, however, is likely much higher because those who have not filed with the bureau of employment cannot be counted. "Net profit of the economy, according to recent data, at the end of 2009 was only 12m euros -- at the end of 2007, it was 270m euros," Kalezic said. Noting that Montenegro last year piled up a trade deficit of 1.36 billion euros, Activa company manager Mladen Bojanic presumes that the country's economic policy has relied more on improvisation than on well-designed strategy. "New ideas require new people. The government must define clearly the strategy of getting out of crisis and finally decide whether its priority would be social policy, preservation of government or economic development," Bojanic told SETimes. This content was commissioned for SETimes.com http://tinyurl.com/27pjmwp
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