SARAJEVO (Reuters) - Montenegro’s economy will grow 4 percent this year and around 3.5 percent in 2018 due to strong activity in the tourism, infrastructure and construction sectors, the central bank vice-governor said on Friday.
The forecast is more optimistic than the one given by the International Monetary Fund earlier this month. [L5N1LV4QP]
“We expect this trend (strong activity) to continue through the end of the year,” Nikola Fabris told Reuters on a sideline of a banking conference in Sarajevo. The economy grew 2.5 percent last year.
Fabris said financing of large infrastructure projects, such as the highway linking the port of Bar with neighboring Serbia will add pressure to public debt next year but expressed hope that fiscal measures adopted by the government will help reign in the debt by 2020.
Montenegro will raise value added tax from 19 percent to 21 percent as of 2018, freeze employment in the public sector, cut salaries to public officials and scrap benefits to many social categories.
“Due to highway construction we expect the public debt to rise to between 75 percent to 80 percent of GDP but that implementation of fiscal measures will help lower it to 67 percent of GDP in 2020,” said Fabris.
He also said the European Union candidate country hopes to open talks on monetary policy with the bloc by the end of 2017 or early 2018. It uses the euro outside the euro zone by choice rather than qualification.
“We have already informed the European Commission that our strategic goal is to keep euro as the official currency. We aim to fulfill all the required criteria and we do not see that having euro as official currency means an automatic membership in the euro zone,” he added.
European Central Bank Executive Board member Benoit Coeure said on Friday Western Balkans nations need to strengthen public trust in their local currencies as an excessive reliance on the euro puts their economies at risk.
“Unofficial euroisation ... constitutes a financial stability risk in the event of sudden and substantial exchange rate fluctuations,” he said adding that it also impedes monetary policy transmission and may limit the overall room for maneuver of monetary policy.
Reporting by Maja Zuvela; Editing by Ivana Sekularac/Jeremy Gaunt