Montenegro’s economic expansion is being accompanied by a sharp widening of its external imbalance, with the current-account deficit reaching 20.5% of GDP in 2025, compared with 17.1% in 2024 and 11.2% in 2023.
The deterioration has occurred as wages and employment have increased and unemployment has fallen to its lowest level since independence. At the same time, domestic consumption and investment have generated stronger demand for imported goods and services than the economy has been able to match through production and exports.
Domestic Demand Drives Import Growth
Private consumption grew 5.3% in 2025, supported by higher wages, employment and household borrowing. Gross fixed investment increased by 11%, while investment activity also required imported machinery, equipment and construction materials. Domestic demand therefore continued to feed into imports, while exports remained concentrated in tourism, electricity and a relatively limited range of low-complexity products.
The scale of the imbalance was particularly evident in the fourth quarter. Imports of goods and services reached €1.4 billion, compared with exports of €617.8 million. The resulting net external deficit of approximately €785 million represented almost 39% of quarterly GDP. Final consumption during the quarter was also higher than the economy’s total quarterly output, with the difference financed through investment flows, borrowing and external financing.
Tourism Revenue Fails to Offset Merchandise Imports
Tourism remains Montenegro’s largest source of service exports, but its contribution has not been sufficient to compensate for the merchandise import bill. The country recorded 2.73 million tourist arrivals in 2025, up 4.7%, while tourism revenue increased 1.4% to €1.48 billion.
The relatively modest growth in revenue compared with visitor numbers indicates that the increase in tourist volumes did not translate proportionately into higher revenue per visitor. Tourism also generates substantial demand for imported products. Hotels, restaurants, retailers and construction companies rely on imported food, beverages, furniture, vehicles, technology and building materials. As a result, stronger tourism activity increases both service exports and merchandise imports, reducing the net effect of gross tourism revenue on the external balance.
Merchandise Trade Remains Deeply Imbalanced
The weakness in merchandise trade continued into 2026. In the first quarter, merchandise exports declined 15.2% year on year to €127.3 million, while imports remained close to €944.5 million. Lower exports of bauxite, transport equipment and pharmaceutical products more than offset modest increases in electricity and food exports.
FDI Provides Only Partial External Financing
Foreign direct investment has provided an important source of external financing. Montenegro recorded €530.7 million in net FDI in 2025, an increase of 8%, while gross inflows reached €1.02 billion.
The EBRD estimates that net FDI covers only around one-third of the current-account deficit. Gross FDI also includes property purchases and intercompany transactions, which do not necessarily expand the country’s capacity to generate exports.
The composition of investment therefore affects the external balance alongside its overall volume. Investment in coastal real estate can generate construction activity, employment and tax revenue, while also increasing demand for imported materials. Once construction is completed, such investment may generate relatively limited recurring export income.
Investment in electricity generation, power grids, logistics, digital services, agriculture and export-oriented companies has a different effect, as these activities can generate continuing foreign-currency revenues or reduce reliance on imports.
FDI Weakens at Start of 2026
The external financing picture also weakened during the opening months of 2026. Between January and April, net FDI fell 7.1%, while gross inflows declined 26.8%.
The change was partly associated with increased capital outflows linked to repayments of intercompany loans.
Euro Adoption Limits Exchange-Rate Adjustment
Montenegro’s adoption of the euro limits currency risk and has supported confidence, but it also means the country does not have the exchange-rate mechanism available to economies with their own currencies.
A conventional currency depreciation could make imports more expensive while improving export competitiveness. Instead, adjustments to Montenegro’s external position must come through productivity, wages, fiscal policy and changes in the composition of investment.
2026 Growth Forecast Keeps Focus on Domestic Demand
The government projects 3.1% GDP growth in 2026. Domestic demand is expected to increase 3.2%, contributing 4.1 percentage points to overall growth. The forecast underscores the relationship between domestic demand and external trade. Consumption and investment can continue supporting economic activity, but without stronger export performance, part of that additional demand will continue to be reflected in higher imports.
Montenegro’s supply capacity includes domestic food production, tourism services, renewable electricity, rail and port logistics, digital businesses and companies capable of joining EU supply chains. Infrastructure projects involving the Port of Bar, the Bar–Belgrade railway and electricity interconnections can contribute to this capacity when they are accompanied by businesses able to use the infrastructure.
The 20.5% of GDP current-account deficit does not represent an immediate crisis. Montenegro continues to have access to investment and external financing and has a credible EU-accession path. At the same time, the size of the deficit leaves the economy exposed to a weaker tourism season, higher energy prices, lower FDI or more expensive sovereign borrowing. The expansion of consumption has supported higher incomes, while the external balance increasingly depends on the economy’s ability to generate sufficient production and exports.
