The Vienna Institute for International Economic Studies (wiiw) released its October 2026 country report warning that Montenegro’s unilateral adoption of the euro (“Euro model”) without formal Eurozone accession exposes public finances to structural fiscal risks. The institute projects the general government deficit to widen to 4.5% of GDP by 2028, driven by rigid expenditure commitments, narrow tax bases, and limited counter-cyclical monetary tools. The report urges immediate tax administration reform, broadening of the VAT base, and introduction of progressive property taxation to stabilize debt dynamics. The Ministry of Finance has acknowledged the findings but maintains that EU accession negotiations will unlock fiscal flexibility.
Key Takeaways
- Deficit Trajectory: Without corrective measures, the fiscal deficit is expected to exceed the Maastricht 3% threshold by 2027, risking loss of market confidence and higher borrowing costs. The 2026 deficit stands at 3.2% of GDP.
- Tax Policy Gaps: Montenegro’s tax-to-GDP ratio remains below regional peers at 22%. The report highlights under-taxation of immovable property, generous corporate tax incentives, and a high VAT registration threshold (€30,000) as key revenue leakages.
- Reform Imperatives: wiiw recommends a medium-term fiscal consolidation package combining expenditure reviews, digitalization of tax collection, and alignment of excise duties with EU minimums to create fiscal space for growth-enhancing investments.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement