JOINT CONCLUSIONS ON MONTENEGORO OF THE ECONOMIC AND FINANCIAL DIALOGUE BETWEEN THE EU AND THE WESTERN BALKANS AND TURKEY

Representatives of the EU Member States, the Western Balkans and Turkey, the European Commission and the European Central Bank, as well as representatives of the central banks of the Western Balkans and Turkey, met for their annual economic policy dialogue. The dialogue aims at preparing the Western Balkans and Turkey for their future participation in the European Semester.

Participants welcomed the overall timely fiscal and monetary support measures adopted by the Western Balkans and Turkey to mitigate the economic fall-out of the crisis. Participants considered it appropriate to continue mitigating the pandemic’s impact on growth, employment and social cohesion by adequately targeted, temporary and transparent fiscal and financial measures until a self-sustained recovery is firmly established.

Participants regretted that Montenegro’s absence of a timely and comprehensive programme, with detailed information on the 2021 budget and the medium-term fiscal strategy, did not allow for a detailed assessment of the programme. The meeting also noted that the policy guidance set out in the conclusions of the Economic and Financial Dialogue of May 2020 has been partially implemented.

Montenegro was, inter alia, invited to provide well-targeted and temporary pandemic-related fiscal support to vulnerable households and businesses, supplement the budget with a medium-term fiscal consolidation plan once the economic recovery takes hold, prepare a new public administration optimisation plan with a view to contain the share of the public sector wage bill in GDP and advance the implementation of a public investment management assessment (PIMA) programme, to improve the quality of public investments.

The participants encouraged Montenegro to adopt amendments to the Law on Budget and Fiscal Responsibility, with the aim of setting up an oversight fiscal council, develop a comprehensive overview of all tax exemptions, including an analysis of their economic and social impact, and support the economy and business liquidity by reducing public sector arrears.

Montenegro is expected to maintain a strong financial sector regulatory framework in line with international and EU best practices, ensure sound credit risk management, and further reduce obstacles to reduce non-performing loans, including by modernising the insolvency regime.

Montenegro was also invited to conduct, in cooperation with local authorities and representatives of business community, an analysis of businesses-related procedures at the local administration level to identify sources of possible inefficiencies and propose improvements of the institutional and regulatory environment, and to focus on further simplification of business taxation.

Furthermore, the participants called on Montenegro to prioritise digitalisation of the public sector and development of transactional electronic government services to speed up and enhance the economic recovery, and to strengthen the cooperation between central and local authorities to develop measures to reduce the informal economy.

Participants invited the authorities to establish a task force to develop a Youth Guarantee Implementation Plan. Based on the review of the social protection system, Montenegro is also expected to finalise the roadmap and start implementing social protection reforms, and to reform the vocational education training to improve labour market outcomes.