Montenegro – Country partnership strategy progress report for the period FY07 – FY10

This country partnership strategy progress report (CPS-PR) assesses progress in implementing the FY07-FY10 country partnership strategy (CPS) for Montenegro.

To date, the Government has made significant progress against CPS goals and portfolio performance has been strong. Whereas most of the CPS resources have been committed, this progress report proposes a lending program for the remainder of the CPS period that maintains some flexibility in the context of the ongoing international financial crisis and economic slowdown.

In the two years following independence in June 2006, Montenegro achieved its principal short-term state-building goals, including adopting a new constitution and ratifying the Stabilization and Association Agreement (SAA) with the European Union (EU). High capital inflows have fueled strong economic growth and high overall budget surpluses. Yet they render the economy vulnerable to declining international liquidity and worsening investor sentiment.

The external economic environment deteriorated markedly in 2008 and 2009. In the wake of the global economic slowdown, the country is likely to see a decline in growth as capital inflows decelerate, real estate prices fall, the demand and price for aluminum drop and tourism weakens.