In evaluating the economic policy of Spajić’s government during its first year, Prof. Dr. Vasilije Kostić, president of the Montenegrin Employers’ Association (CUP) and an economic analyst, pointed out a significant disconnect between intentions and outcomes. He noted that measures often contradict their intended goals.
Kostić emphasized that achieving desired results requires more than just good decision-making; it necessitates effective implementation. “As the saying goes, ‘the devil is in the details.’ This is why we frequently find that ‘good decisions’ lead to poor practices, ultimately resulting in outcomes that are neither desired nor intended. This assessment applies not only to the current government but to previous administrations as well.”
Macroeconomic challenges
While acknowledging the government’s good intentions to improve citizens’ living standards, Kostić criticized the approach taken, warning that it could have adverse long-term effects on society. He referred specifically to the ongoing wage increase program, which he argues lacks a solid economic foundation.
“Simply wishing to improve standards is not enough. We need robust economic results, which are currently lacking. In fact, existing macroeconomic challenges are deepening and although employment growth appears positive, it is largely concentrated in the public sector,” he said.
Kostić also raised concerns about rising public debt, increasing imports undermining economic stability and declining exports. He noted that foreign direct investment has weakened significantly, inflation rates are higher than in neighboring countries and overall consumption continues to rise despite these challenges.
“Personal and government consumption are increasing, which should not be the case given the current economic indicators. The impressive growth we’ve seen is not sustainable; it relies heavily on domestic demand driven by artificially inflated household incomes. There has been no discussion of restructuring the Montenegrin economy, which should be a strategic priority,” he stated.
Public finance stability
Kostić highlighted the relative stability of public finances as a positive note, pointing to an improved credit rating and the government’s commitment to dynamic economic growth through the recent Development Bank Law. However, he questioned the efficacy of this approach, considering the Development Bank’s role relative to the Central Bank of Montenegro.
“This law has significant shortcomings and may represent a step back, but only time will tell,” Kostić added.
He expressed concerns that changes to the tax system and rising minimum wages would create more difficult conditions for businesses, particularly affecting micro and small enterprises in tourism and wine production. He criticized the government’s lack of sensitivity to the needs of strategic economic development and support for local wine production.
Kostić argued that the government has unjustly demonized the trade sector, which plays a crucial role in the Montenegrin economy in terms of employment and GDP contribution. He believes that labeling traders as inflation generators was an unfounded political move, lacking proper analysis.
“Ultimately, while the government’s desire to improve citizens’ standards is clear, it cannot come at the expense of other priorities. We must ensure that we do not pay the price in terms of development and progress, or risk falling behind,” Kostić concluded.
