This report covers the main macroeconomic releases from early December 2013 until January 3, 2014 as well as the financial and political events that took place in Montenegro during this period. It also includes corporate news for companies including aluminum firm KAP, as well as Skoda Praha, Powerchina’s Hubei Electric Power Survey & Design Institute, a Slovak consortium (Istroenergo Group Slovakia-SES Tlmace), and China Machinery Engineering Corporation (CMEC).

GDP grew by a real 4.0% year on year in July-September, accelerating from a 3.4% real growth in the second quarter of the year and a 1.1% GDP expansion in the first quarter. CPI recorded zero annual growth in November after edging up 0.5% year on year the month before as rising alcoholic beverages and housing charges were offset by falling food and transport costs. The unemployment rate fell to 17.6% in Q3 from 19.2% in Q2 and 18.8% a year ago, likely reflecting favourable seasonal factors.

Parliament approved the draft budget for 2014 late on December 27, targeting a lower deficit of EUR 71mn, equivalent to 1.99% of GDP. In 2013 the government expects the budget gap to reach EUR 151.9mn, equalling 4.6% of the full-year GDP forecast and significantly exceeding the official target of EUR 93mn (2.73% of GDP) due to higher-than-expected expenditures related to the aluminium smelter KAP.

Key Points:

• In corporate news, on December 6 Montenegro launched the tender for the sale of bankrupt aluminum firm KAP’s assets—a move anticipated ever since the company entered into insolvency in July—without setting a minimum price.

• Montenegro’s state controlled electricity firm EPCG has shortlisted four companies—including Skoda Praha, Powerchina’s Hubei Electric Power Survey & Design Institute, a Slovak consortium (Istroenergo Group Slovakia-SES Tlmace), and China Machinery Engineering Corporation (CMEC)—in the tender for a construction of a second unit of 220-300MW at its sole thermal power plant TE Pljevlja, electricity firm EPCG said on Dec 16.

• November’s industrial production growth strengthened to 21.4% year on year from 10.5% year on year the month before, on the back of rising manufacturing and utilities output which offset a decline in mining and quarrying.

• The current account gap shrank 29.1% year on year to EUR 231.7mn in January–September, due to narrowing foreign trade deficit and rising net income from abroad.

• Net FDI inflow to Montenegro dropped 25.7% year on year to EUR 255.9mn in January-October, deteriorating from a 14.8% year on year contraction as of end-September, due to lower equity investments.