Moody's changes outlook on Montenegro's rating from stable to positive

Moody's Investors Service ("Moody's") new Report published on Friday evening has changed the outlook on the Government of Montenegro's B1 long-term issuer and senior unsecured debt ratings to positive from stable. This change signals the confidence of investors in the economic progress of our country, as well as the support to the stabilisation measures of public finances implemented by the Government of Montenegro and the Ministry of Finance.

According to Moody's analysts, the key drivers for the change in the rating outlook to positive from stable are:

(1) Montenegro's favourable medium-term growth outlook, supported by structural reforms, progress with respect to the country's EU accession negotiations and significant investment projects in transportation, tourism and energy sectors.

(2) The government's consolidation measures that improve Montenegro's fiscal position.

(3) The government took effective actions to significantly lower Montenegro's medium-term refinancing risks.

Moody's expects potential growth to rise to about 3.5%, while the highway project will further improve Montenegro's economic prospects by facilitating access to main coastal hubs and diversifying the tourist sector by opening up links to the mountainous north of the country. Moreover, large energy projects will support investment and Montenegro's export potential, increasing the country's competitiveness and encouraging investments in new energy sources, particularly renewables.

The authorities made progress on the implementation of significant fiscal consolidation measures comprising higher revenue generation and expenditure cuts as well as measures taken to tackle pension and public-sector wages.

Moody's expects the fiscal policy actions and the commitment of the government to reduce government debt as well as contingent liabilities. The debt-to-GDP ratio is expected to decline to below 50% by 2022.

The ongoing success achieved in bringing the legal and operational framework into line with EU norms enhances local operating conditions and the country's attractiveness to foreign direct investment (FDI). The Report states that Montenegro is the front-runner in EU accession negotiations.