According to the Ministry of Finance, Montenegro’s budget recorded a deficit of 63.9 million euros in the first three months of this year, which is 0.8% of the estimated GDP. This is 56.9 million euros better than the planned deficit of 120.8 million euros.
Professor Maja Baćović from the Faculty of Economics believes that a deficit at this level in the first quarter is not alarming, although she notes that it would be better, both for development and public debt management, to avoid a fiscal deficit altogether.
“The data on the budget execution in the first quarter of 2025 shows that a smaller portion of current expenditures was financed by the deficit during this period. A deficit of 63.9 million euros was realized, while capital expenditures amounted to 30.8 million euros. However, budget revenues have a seasonal nature, so this situation can balance out in the upcoming period. If tax revenues are realized as planned by the end of the year, no deficit financing for current spending is expected according to the budget plan,” said Baćović.
The government previously announced that current expenses could be covered by current revenues without the need for borrowing to finance them.
Budget revenues for the first three months of this year amounted to 580.4 million euros, or 7.3% of the estimated GDP, which is 4.7 million euros or 0.8% higher than the same period last year. However, the revenue target for this period was short by 13 million euros, with revenue realization at 97.8% of the planned amount.
“Reduction of tax revenues by 13 million euros is not a significant deviation, it’s only 0.3% off the plan. Such deviations are always possible due to fluctuations in the economy’s activity,” Baćović noted.
Expenditures for the first three months amounted to 644.3 million euros, or 8.1% of the estimated GDP. Compared to the same period last year, expenditures increased by 60.9 million euros or 10.4%. However, compared to the plan for this year, expenditures were lower by 69.9 million euros or 9.8%, reflecting the timing of obligations arriving in this period.
“Reducing expenditures compared to the plan contributed to a better fiscal balance at the end of the first quarter. However, if this does not mean actual savings and rationalization of current spending, it could indicate a negative fiscal balance later in the year,” said Baćović. She also pointed out that lower capital expenditures than planned should be an exception, not a rule, as higher capital expenditures give a developmental character to fiscal policy.
VAT revenues for the first quarter amounted to 282.3 million euros, an increase of 29.9 million euros or 11.9% compared to the same period in 2024. This increase reflects a rise in economic activity, consumption, investments, and a reduction in the shadow economy.
Revenue from corporate income tax amounted to 78.2 million euros, slightly lower than last year, while excise revenues totaled 71.5 million euros, which is 4.5 million euros or 6.8% more than in the same period last year. Notably, revenues from excise taxes on tobacco products increased by 3.8 million euros or 19.4% compared to 2024. The data shows an increase in cigarette sales by 10.3% or 22.1 tons, as well as an increase in the sale of smokeless tobacco products by about 23% or 353,458 packs. This suggests a continuing trend of growth in the legal cigarette market in the first months of this year.
