IMF has concluded Article IV consultation with Montenegro for the year 2019. IMF has commended Montenegro for strong economic growth, economy expanding by 3% in 2019.
With Montenegro set to receive excess of half a billion euros through implementation of economic citizenship, the organization has called for strong due diligence checks on applicants and also publication of names of new citizens.
Montenegro has enjoyed strong economic growth in recent years, boosted by the implementation of large investment projects, including the construction of the Bar-Boljare highway. Growth should continue over the medium term, though at a more moderate pace as highway construction ends. Staff projects the economy to expand by 3 percent in 2019 and 2.5 percent in 2020, with the end of highway construction acting as a drag on growth.
IMF Executive Directors welcomed the strong recent growth performance of the Montenegrin economy, bolstered by large investment projects and buoyant tourism, and took positive note of the significant fiscal adjustment since 2017
With 13 banks in Montenegro, the overall banking sector exhibits improving asset quality, strong credit growth, high liquidity, and is well capitalized. However, the sector appears crowded for a small country, which may create earnings challenges for some banks.
IMF said Significant positive effects in generating revenues, primarily through attracting new investments, are also expected from the implementation of the Economic Citizenship Program which implies acquiring Montenegrin citizenship based on the implementation of an investment program that contributes to Montenegro’s economic and commercial development. For this purpose, the authorities have signed a contract with three international and reputable agencies that will be responsible for the due diligence to minimize risks.
The expected budget impact could be around €30 million EUR in three years from fees, and €500 million EUR in investments with further multiplying effects on budget revenues and economic activity (0.6 and 10.6 percent of GDP respectively).
IMF has further recommended Montenegrin authorities to strengthen the AML/CFT supervisory framework, including through enhanced monitoring of potential reputational and financial integrity risks posed by the investor citizenship program.
The Investor citizenship program launched this year creates potential financial integrity and reputational risks that should be addressed. The authorities should ensure implementation of comprehensive due diligence measures on applicants, including on their source of wealth and funds, as well as good transparency practices, including publication of the names of the new citizens
