Montenegro's Tourism Growth Slows Due to Rising Prices Deterring Visitors

Economic Impact of Tourism in Montenegro

• Summer Tourism Significance: The summer tourism season is crucial for Montenegro, providing the majority of personal income for the year. However, rising prices have led to a decrease in visitor numbers.
• Visitor Statistics: Budva, a coastal town with a population of 18,000, sees its population double during summer. Recent data indicates a nearly 3% drop in overnight stays in July 2024 compared to the previous year.

Challenges in Economic Growth

• GDP and Economic Structure: Montenegro has a GDP of $8.1 billion and a population of 623,000. The economy is heavily reliant on tourism, which contributes about 24.5% to GDP and employs over 20% of the workforce.
• Growth Rate Decline: Economic growth slowed to 2.5% year-over-year in Q2 2025, the weakest since the COVID-19 pandemic, with inflation and high unemployment contributing to economic challenges.

Foreign Investment and Productivity Issues

• Investment Efforts: The Montenegrin government has promoted foreign direct investment to boost sectors like construction and tourism, but these efforts have not resulted in significant productivity gains.
• Infrastructure Challenges: Major projects, such as the Bar-Boljare Highway, have faced corruption allegations and financial mismanagement, hindering economic progress.

Corruption and Governance

• Corruption Perceptions: Montenegro ranks 65th out of 180 countries in Transparency International's Corruption Perceptions Index, highlighting ongoing issues with systemic corruption and governance.
• EU Support: The EU remains a key donor, recently approving a €22.5 million grant for water and wastewater projects aimed at improving living standards for 30,000 people.

Regional Disparities and Development Imbalances

• Economic Disparities: The northern region of Montenegro, rich in natural resources, remains the poorest, with over 60% of the population living in poverty. Underinvestment and inadequate infrastructure hinder its economic contribution.
• Environmental Concerns: Urban sprawl and illegal construction are straining resources, while Montenegro is one of Europe's least efficient users of energy and water.

Policy and Employment Challenges

• Policy Framework: Montenegro has made progress in aligning its policies with EU standards, particularly in tourism and trade, but faces challenges from inefficient state-owned enterprises and slow digital infrastructure development.
• Unemployment Rates: Unemployment was around 11% in 2024, with young people particularly affected, leading to a brain drain as skilled workers emigrate.

Future Directions for Economic Resilience

• Need for Reforms: To align with EU standards and improve resilience, Montenegro must diversify its economy, enhance efficiency, and address corruption.
• Investment in Key Areas: The government is encouraged to invest in education, digitalization, and renewable energy to foster sustainable growth and improve living standards.