Country Overview

MONTENEGRO COUNTRY & ECONOMIC OVERVIEW

Montenegro General Info

• Capital City: Podgorica (source 1)

• Population: 650,757 (source 1)

• Membership of International Organisations:

United Nations (UN), Organisation for Security

& Co-operation in Europe (OSCE), Council of

Europe (CoE), International Monetary Fund (IMF)

World Bank (WB), European Bank of Reconstruct-

Ion and Development (EBRD), Central European

Initiative (CEI), International Labour Organisation

(ILO), United Nations World Tourism Organisation

(UNWTO), South Eastern Europe Co-operation

Process (SEECP) and the Stability Pact. (source 1)

• Official Currency: EUR (source 1)

• GDP real growth rate: 7.1% (source 1)

• GNI per capita: $5,180 (World Bank 2007)

• Bilateral agreements with all EU states

• Corporate taxation at ONLY 9% (source 3)

• Individual taxation at 15% (source 3)

• PDV (local VAT/GST/Sales Tax) is 17% (source 3)

• Since 2000 economic growth has been at a rate above 4% per year on average (source 2)

• According to the National Bank of Montenegro, the inflation rate has been kept at stable levels in recent years. The strong fiscal policy implemented by the Montenegrin government should reduce the inflation rate to 5.0% in 2009 from 8.0% in 2008 (source 2)

• According to IMF, nominal GDP of Montenegro was $4.822 billion in 2008. The GDP PPP for 2008 was $6.944 billion

The Montenegrin holiday homes market recorded a stabile growth during 2008 also, though it was lower in percentage compared to year 2007. The cadastre and land registry continue to be upgraded and spatial planning has been accelerated which will contribute to development support. However, impact of global financial crisis cannot be neglected. (source 2)

The highest share in number of approved property applications has been still held by the Russians, followed by the British and Israeli investors. They exhibit interest in the capital gain of a holiday home at the seaside, rather than personal use towards from the investment. (source 2)

MONTENEGRO COUNTRY & ECONOMIC OVERVIEW continued

Being the centre of the Montenegrin tourism, Budva is generally perceived as the Montenegrin coastal city which attracts most tourists and foreign investments. A price of real estate has been higher in Budva and surrounding communities- Becici, Petrovac and Sveti Stefan. Older apartments are currently being sold at €2,000-€3,500/m2 and newer apartments (6-10 years old buildings) currently range between €2,500- €4,000 per square meter, depending on the location - proximity to the beach. There are also residential units in Budva Old town which are achieving prices of €6,000/m2, but property in this area is rather rare. (source 2)

Regarding the conventional residential market in Kotor, most buildings are 10-30 years old. Sale

prices of these apartments are between €1,600- €3,300 per m2, depending on an exact location,

age of the building, proximity to the sea. However, it should be emphasized that, in a protected old

town of Kotor, prices could exceed the amount of €5,000/sq.m. (source 2)

Despite the international credit crunch, the uniqueness of the environment and the potential of the country appear to be factors capable to maintain its stability. Moreover, land investments supported by a sustainable land market can be carefully planned and developed on behalf of returns that will be anticipated in the next years during the expected upturn of the international economy. Thus, many investors acknowledge opportunities in the property market expecting their planned investments to mature (i.e. after 2-4 years) during a period that is expected to be characterized by economic recovery. Moreover, this set of opportunities in property investments is stimulated by the positive amendments of planning and regulation frameworks as well public networks and infrastructure. (source 2)

It is important to mention that the quality of tourists in Tivat and Kotor is expected to be reflected to higher disposable income, especially due to the fact that nautical tourism is growing exponentially, and that will further stimulate significantly the local economies.

“And in a way, Porto Montenegro would signal more of a rebirth than a revolution. In the 1950s and '60s, film stars like Sophia Loren and Elizabeth Taylor, as well as Communist Party leaders, populated nearby Sveti Stefan, a former fishing village transformed into a luxury getaway. Now government officials are following the lead of Croatia whose coastline and cities swarm with hip visitors - by wooing investors. Aman Resorts has acquired Sveti Stefan and hopes to restore its luster, while Donald Trump, Venus and Serena Williams, and the Formula 1 driver Michael Schumacher are rumored to be investing in property. There is, in addition, Russian money everywhere.”

Article: “The next Monaco?”

By Philip Delves Broughton

Fortune Magazine, October 2007

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Source: 1 Foreign & Commonwealth Office Great Britain (www.fco.gov.uk)

2 Colliers International Research & Market Reports

3 Wikipedia Tax Rates around the World (http://en.wikipedia.org/wiki/Tax_rates_around_the_world)

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