Article

 

Critical overview of Montenegro's growth model (p.123-146)

by

Fabris Nikola, Central Bank of Montenegro and Belgrade University

Mitrović Marijana, Central Bank of Montenegro

Keywords : Montenegro, Growth model, Crisis, Challenges, Recommendations

JEL classification : E60, E66

Abstract

There are numerous theoretical explanations of growth models, but the authors hereof intend to analyse the growth model of Montenegro, without any pretension to fit it in any of the existing theories, but to point to the key growth factors, the existing model’s limitations, and future actions to be taken in order to return Montenegro to the path of economic growth. In the pre-crisis period, Montenegro had been in a group of European countries experiencing the fastest growth. However, the global crisis induced a sharp decline in activity, unemployment increase, and severe difficulties in numerous sectors. The backbones of growth in the pre-crisis period were a large inflow of foreign accumulation and a high level of domestic aggregate demand. Such a growth created many contradictions so that it is likely that serious problems would have arisen even if it hadn’t been for the crisis. The paper consists of two parts. The first part gives an analysis of the existing growth model and shows why it is not viable in the long-term. The second part analyzes the challenges that Montenegro will face in the upcoming period and provides recommendations for acceleration of economic growth.