UPDATE: Montenegro faces urgent economic challenges as it strives for European Union (EU) membership. Dr. Željko Bogetić, former chief economist at the World Bank, emphasizes the need for a transformative shift from consumption and debt to sustainable development and economic productivity to meet EU standards.
In an exclusive interview with Pobjeda, Dr. Bogetić outlines the critical need for reforms to stabilize and grow Montenegro’s economy. He highlights that the recent surge in economic growth has been fueled by increased public spending and borrowing, but warns that this model is unsustainable in the long term.
“From 2021 to 2023, we witnessed a unique recovery post-pandemic,” Dr. Bogetić explains. “However, rising inflation, currently at 4%, has significantly impacted purchasing power, especially for the most vulnerable populations.” He asserts that these economic pressures make it imperative for Montenegro to pivot towards a more resilient and diversified economy.
The upcoming Forum of Excellent Directors on March 24, 2024, in Podgorica will feature Dr. Bogetić as a key speaker, where he plans to address these pressing economic issues directly. He stresses that Montenegro must adopt a zero-deficit fiscal policy to mitigate inflationary pressures and reduce public debt, which currently stands at an alarming 60% of GDP.
Dr. Bogetić warns against unnecessary increases in public consumption and wages, which could exacerbate inflation and diminish the quality of life for many citizens. He advocates for a significant reduction of public debt to around 40% of GDP, highlighting the risks posed by external economic shocks and domestic inflation.
“The key to a sustainable economic future lies in strengthening public finances and enhancing the efficiency of government spending,” he states. This shift is essential not only to boost economic growth but also to ensure that the benefits reach all citizens, particularly the disadvantaged.
Looking ahead, Dr. Bogetić envisions Montenegro as a success story within the EU framework. He predicts that within the next decade, the country could achieve a per capita income of around $14,000, provided it embraces key sectors like tourism, energy, and the digital economy. “The path to prosperity is clear, but we must act now to build a robust foundation,” he asserts.
Montenegro’s ambition to join the EU is fraught with challenges. Yet, Dr. Bogetić believes that with decisive reforms in macroeconomic stability, investment in knowledge and innovation, and strengthening of institutions, Montenegro can successfully integrate into the European community.
As the country prepares for critical discussions at the upcoming forum, the urgency to shift its economic model has never been clearer. The focus must now be on creating a resilient economy that prioritizes sustainability, productivity, and the well-being of all its citizens.
