As Montenegro navigates its economic landscape, the power sector is increasingly pivotal to the country’s export performance. The outlook for exports in the latter half of 2026 appears to hinge significantly on electricity production rather than traditional manufacturing outputs.
The structural weaknesses in Montenegro’s goods trade are evident. In the first quarter of 2026, total external trade in goods reached €1.07 billion, representing a decline of 2.2 percent compared to the previous year. Exports fell sharply by 15.2 percent, totaling €127.3 million, while imports remained relatively stable at €944.5 million. Consequently, the export-import coverage ratio decreased to 13.5 percent from 15.9 percent a year earlier.
Electricity plays a crucial role in this trade scenario. During the same period, mineral fuels and related products emerged as the largest export category, valued at €48.4 million, with electric current contributing €44.4 million. This reliance underscores how sensitive Montenegro’s export performance is to fluctuations in electricity output and pricing.
Recent production data indicates a potential rebound in the energy sector. Industrial production experienced a year-on-year increase of 7.5 percent in the first quarter, largely propelled by a 27.3 percent rise in electricity, gas, steam, and air-conditioning supply. In contrast, manufacturing output declined by 4 percent, alongside a significant drop of 17 percent in mining and quarrying activities.
This mixed industrial outlook suggests that while electricity generation may bolster growth prospects in the second half of the year, manufacturing remains constrained, particularly following the temporary closure of the Pljevlja thermal power plant for ecological upgrades in 2025. The European Bank for Reconstruction and Development (EBRD) noted that growth moderated last year partly due to reduced electricity exports during this closure; however, production has begun to recover with the plant’s recent resumption of operations.
Despite these positive signs, risks persist within Montenegro’s power system structure. The reliance on Pljevlja remains critical, while hydropower generation is contingent on variable weather and water conditions. According to OECD analysis, hydropower accounted for over half of Montenegro’s electricity generation in 2023, with coal-fired generation sourced from the Pljevlja facility.
On a more optimistic note, investment initiatives are underway that could enhance future energy production capabilities. In January, Montenegro’s state-owned utility EPCG partnered with UAE-based Masdar to explore joint ventures focused on large-scale renewable energy projects encompassing solar, wind, hydropower, battery storage, and hybrid systems aimed at both domestic consumption and green-power exports through an undersea connection to Italy.
The forecast for the second half of 2026 indicates recovery rather than transformation; while improvements in electricity exports are anticipated compared to the disrupted baseline of 2025, overall goods trade will likely remain heavily negative due to substantial imports and limited manufacturing exports.
Companies well-positioned for this evolving landscape include EPCG-linked contractors, renewable energy developers, grid and battery-storage suppliers, engineering firms, and those capable of reducing energy intensity. Conversely, firms heavily reliant on imports with minimal pricing power and manufacturers facing high energy or logistics costs may struggle.
While electricity output is expected to positively influence Montenegro’s economy in the latter half of 2026, the country will continue grappling with a significant goods deficit. Although renewable energy initiatives present strategic opportunities for future growth, they have yet to substantially alter the trade dynamics anticipated for 2026.
Montenegro’s energy sector has evolved beyond mere utility concerns; it now stands as a critical lever capable of significantly impacting the nation’s export calculations.
