Sustained long-term economic growth requires developing sectors with higher productivity, as this leads to faster income growth and improved living standards, explained Professor Maja Baćović from the University of Montenegro’s Faculty of Economics in an interview for Pobjeda. She noted that Montenegro’s economy is dominated by low-productivity activities, with only 8 % of the workforce employed in sectors where productivity reaches €62,000 per employee, compared to the national average of €21,500 recorded last year. Meanwhile, 75 % of employees work in sectors where productivity falls below the national average. Baćović emphasized that if half of Montenegro’s workforce were employed in high-productivity sectors, the country’s GDP per capita would rise to €21,000, instead of the current €12,000.
Economic diversification, she explained, refers to broadening the range of productive activities to stimulate growth and reduce dependence on a limited number of industries. A diversified economy is more resilient to external shocks — such as global recessions, pandemics, or political instability — which is especially critical for a small and highly open economy like Montenegro. Excessive reliance on a single sector, notably tourism, increases vulnerability, as global fluctuations in demand can quickly trigger recessionary pressures. Diversification also enables better resource allocation, higher wages, increased income, and more varied employment opportunities, particularly when the share of high-productivity sectors grows. According to extensive research, productivity is highest in knowledge-based services, high-tech manufacturing, energy, aviation, and sectors involving advanced technologies.
Baćović explained that Montenegro’s most productive sectors in 2024 included finance, energy, IT, real estate, and mining. These sectors employ only a small portion of the workforce, yet their productivity levels significantly exceed the national average. Meanwhile, the vast majority of employees work in lower-productivity fields such as construction, transport, trade, and public administration. Structural adjustments—either through sectoral diversification (developing new industries) or vertical diversification (expanding production within existing sectors)—could raise competitiveness. Montenegro has considerable potential in areas such as IT and digital services, renewable energy, food processing based on domestic agricultural goods, wood-processing industries, and higher-value branches of tourism, including medical, congress, adventure, and rural tourism.
Foreign direct investment (FDI) can significantly support diversification, not only by providing capital but also through the transfer of knowledge, technology, and innovative practices. However, Baćović noted that Montenegro’s FDI structure has shifted unfavorably: while from 2009 to 2019, 35 % of foreign investments went into companies and 27 % into real estate, between 2021 and 2025 only 16 % supported productive sectors, while 45 % flowed into real estate. The attractiveness of the economic and institutional environment, combined with political stability, plays a crucial role in reversing this trend, and Montenegro’s EU accession path could help restore investor confidence.
Reflecting on the impact of the pandemic, Baćović recalled that Montenegro experienced Europe’s deepest recession in 2020 due to its extreme dependence on tourism. Research conducted before COVID-19 already showed that dominant low-productivity services slow long-term growth: tourism boosts income in the short run, but its effects diminish over time because of low productivity and high volatility. Nevertheless, tourism remains essential for monetary stability, as it is Montenegro’s most significant export sector. Despite lessons from the pandemic, recent data show increasing contributions from hospitality and trade, while the share of manufacturing, agriculture, and energy continues to fall.
Diversifying an economy is a long-term process requiring investment in human capital, particularly education and training to build a skilled workforce—engineers, programmers, technicians—able to support new sectors. It also demands improvements in transport, energy, and digital infrastructure. Institutional reforms, including simplifying administrative procedures, ensuring legal predictability, and providing tax incentives, can further attract productive FDI. Support for startups and SMEs in new industries—through preferential loans and innovation funds—is essential.
Montenegro has already taken some steps, adopting strategies for digital transformation, circular transition, and renewable energy development. Initiatives such as the Innovation Fund and the creation of the Science and Technology Park provide support for innovation and startup growth. Regional development policies are also underway. If implemented consistently and effectively, these measures could significantly advance the diversification of Montenegro’s economy and support its long-term growth trajectory.
