VZCZCXRO0529
RR RUEHAG RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ
RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBW #0568/01 1020941
ZNR UUUUU ZZH
R 120941Z APR 06
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 8347
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 BELGRADE 000568 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PASS TO OPIC, EXIM, TDA AND USAID 
USDOC FOR 4232/ITA/MAC/OEERIS/SSAVICH 
 
E.O. 12958: N/A 
TAGS: ECON EFIN KPAO ETRD EINV EAID PGOV MW SR
SUBJECT:  MONTENEGRO: ECONOMIC DEVELOPMENTS: MARCH 2006 
 
Index: 
MACROECONOMICS: 
-- Public Debt Up in Euros, Down as Percent of GDP 
-- Industrial Production Recovers Slightly 
 
BUSINESS and TOURISM: 
-- Tourism Predicted to Be 51.5 Percent of Exports 
-- Ada Bojana to be Tendered 
-- IKEA to Purchase Products From Montenegro, But No Stores 
 
PUBLIC ECONOMY: 
-- Unemployment Rises Slightly 
-- Real Wages Rise 
-- Government Offers Housing Loans 
 
T-BILLS 
STOCKS 
 
MACROECONOMICS: 
 
Public Debt Up in Euros, Down as Percent of GDP 
--------------------------------------------- -- 
¶1. (U) Public debt rose 4.5 percent in 2005, to Euros 704.4 
million.  As a share of GDP, public declined from 45.7 
percent in 2004 to 42.7 percent. Seventy-seven percent of 
the debt was inherited from the former Yugoslavia.  For 
2006, the Finance Ministry plans to repay Euros 151.6 
million of the outstanding Euros 513.4 million in foreign 
debt.  It repaid Euros 105.3 million in foreign debt in 
2005, and about 55 million in 2004. 
 
Industrial Production Recovers Slightly 
--------------------------------------- 
 
¶2. (U) Industrial production in the first two months of 
2006 was 5.2 percent higher than in the same period in 
2005, an annual growth rate of 4.7 percent. Industrial 
production fell 1.9 percent in 2005, which the Central bank 
of Montenegro attributes to poor performance by non- 
privatized companies, especially energy and mining.  The 
Central bank cited tourism and banking as the engines for 
Montenegrin economic growth. 
 
BUSINESS and TOURISM: 
 
Tourism Predicted to Be 51.5 Percent of Exports 
--------------------------------------------- -- 
 
¶3. (U) The independent World Trade and Tourism Council 
(WTTC) projects that tourism will generate 51.5 percent of 
Montenegro's exports in 2006, up 20 percent from last year. 
The annual growth in tourist receipts for the next decade 
is predicted to be 10.2 percent, and for the third year in 
a row Montenegro's growth rate is first globally.  Tourism 
employment is expected to grow 5 percent annually, until 25 
percent of the workforce is in tourism by 2016. 
 
Ada Bojana to be Tendered 
------------------------- 
 
¶4. (U) The Minister of Tourism announced that an 
international tender for the lease of Ada Bojana will be 
opened in early April, and stay open for three months. Ada 
Bojana is an island on the coast by Albania, and was a 
nudist resort in past decades.  The GoM is looking to 
replace that with a number of four- and five-star hotels. 
Interest has been shown by American and western European 
investors. 
 
IKEA to Purchase Products From Montenegro, But No Stores 
--------------------------------------------- ----------- 
 
¶5. (U) IKEA has announced that it is interested in resuming 
purchasing finished and semi-finished wood products from 
Montenegro.  If the Montenegrin suppliers can meet IKEA's 
environmental and other standards, the contract would last 
at least three years.  However, IKEA confirmed that they do 
not plan on opening any stores in Montenegro for at least 
several years. 
 
PUBLIC ECONOMY: 
 
Unemployment Rises Slightly 
--------------------------- 
 
¶6. (U) The GoM said unemployment rose 0.2 percent, to 18.6 
percent.  Unemployment a year ago was 22.2 percent. Labor 
 
BELGRADE 00000568  002 OF 002 
 
 
Ministry officials said that the real unemployment, 
calculated by international standards, was between 12 and 
15 percent. 
 
Real Wages Rise 
--------------- 
 
¶7. (U) The average net monthly wage in February was Euros 
230, up 12.2 percent from January.  Retail prices rose 0.3 
percent, and the consumer basket for a family of four rose 
0.7 percent to Euros 266. 
 
Government Offers Housing Loans 
------------------------------- 
¶8. (U) The GoM has decided to offer subsidized housing 
loans to the public. Loans range from Euros 5,000 to Euros 
30,000, with a period of 20 years and an annual interest 
rate of 4 percent -- monthly payments will be Euros 90 to 
¶180.  Banks will receive a subsidy of 2.4 percent from the 
Government on the loans. 
 
T-BILLS 
 
¶9. (U) One auction of Treasury bills, with a total face 
value of EUR 1.3 million, was held in February (note: data 
lags by one month). The average weighted annualized 
interest rate for the auction held in February amounted to 
0.46 percent.  The lowest accepted interest rate at the 
auctions held in February was 0.45 percent while the 
highest accepted interest rate was 0.49 percent. 
Participants at the auctions included local banks. 
 
STOCKS 
 
¶10. (U) The NEX20 index of the Nex Montenegro Stock 
Exchange ended the month of March steady, at 10,262.40. The 
Moste index of Montenegroberza rose 1.4 percent to 487.727 
in March. The steadiness in the markets, after the sharp 
(400%) growth in 2005, reflects the completion of major 
privatizations and a lull before the next tranche. Major 
components of the NEX20 include the privatized Telekom CG 
and Jugopetrol; major components of the Moste include 
aluminum smelter KAP and vineyard Plantaze. Note: The 
Montenegrin exchanges are still nascent, and the level of 
capitalization represented is small although rising (NEX 
capitalization at the end of 2004 was Euros 495 million; at 
the end of November 2005 it was Euros 1,410 million). 
 
POLT