Montenegro’s economy expanded 2.6 per cent year on year in the first quarter, with household consumption and fixed investment driving growth while exports weakened sharply. The quarterly rate improved from 1.5 per cent in the fourth quarter of 2025, but remained below the 2.8 per cent recorded in the same quarter a year earlier.
Household consumption increased 6.8 per cent, while gross fixed-capital formation climbed 20.9 per cent. Public consumption grew by 1.2 per cent. The combination of wage income, credit and construction supported economic activity as the government entered a new infrastructure investment cycle.
The external sector recorded a substantially weaker performance. Exports of goods and services declined 14 per cent year on year, after falling 12.8 per cent in the preceding quarter. Imports decreased by only 1.3 per cent, leaving net exports to reduce first-quarter GDP growth by an estimated 3.8 percentage points. The figures show a widening gap between domestic spending and external performance. Investment and consumption are increasing, while the economy is not generating sufficient tradable goods and services to offset the import requirements associated with construction, equipment purchases, household demand and energy.
Growth forecasts for 2026 also differ between institutions. The government expects the economy to expand 3.1 per cent, while the European Commission forecasts 2.8 per cent. Erste Group has lowered its projection to 2.6 per cent from 3.3 per cent previously. Erste expects nominal wage growth to slow from 15.5 per cent in 2025 to around 3 per cent in 2026. Higher fuel and import prices are expected to take a larger share of household income during the second half of the year, reducing the consumption impulse generated by the Europe Now 2 wage reforms.
The increase in fixed-capital formation reflects Montenegro’s shift towards investment-led growth, although much of the current expansion is associated with construction rather than completed productive capacity. The economic return is expected to arise as transport, energy and tourism assets begin generating additional exports, fiscal revenue or lower import costs.
