Excerpts from Key findings of the 2021 Report on Montenegro:

On the economic criteria Montenegro has made some progress and is moderately prepared in developing a functioning market economy. The country experienced a sharp recession in 2020 as the COVID-19 pandemic took a heavy toll on its tourism-dependent economy. This created large negative spill over effects on private consumption, investment, employment, trade and public finances. To support citizens and the economy, authorities implemented several economic support packages. These measures were, to a large extent, well targeted, transparent and of a temporary character. In spite of some delays due to the pandemic, the government continued implementing some of the envisaged reforms to improve the business environment. An orderly government transition in the middle of the crisis preserved the effectiveness of the COVID-19 policy response. The new government managed to mitigate fiscal risks by accumulating sizeable fiscal buffers to cover the 2021 financing needs, including for additional COVID-19 support programmes. The financial sector remained stable during the crisis, as a result of its strong pre-crisis position and the support measures implemented by the authorities, but the delayed impact of the crisis on bank balance sheets calls for close monitoring of the financial institutions.

Montenegro has made some progress and is moderately prepared to cope with competitive pressure and market forces within the EU. The COVID-19 pandemic demonstrated that lack of diversification makes Montenegro's tourism-dependent economy highly vulnerable to shocks. Some efforts have been made to improve innovation capacities and to introduce EU standards at local companies thanks to public grants, but these remain modest given the scale of the challenge. The quality of the educational system and curricula preferences appear inadequate to raise human capital and address skill mismatches. Modern telecommunication and energy infrastructure is being deployed rapidly, but there is a substantial deficit in transport infrastructure, hindering integration with regional and EU markets. In addition, the low level of sophistication of domestic products, the small size of local companies and low level of participation in external markets represent major obstacles for increasing competitiveness and diversifying the economy.

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Source: ec.europa.eu/commission/