Montenegro’s trade expansion widens the external gap as energy losses and asset repricing intensify

Montenegro’s economic momentum is being accompanied by a less comfortable reality: headline growth indicators are increasingly diverging from the country’s underlying external and sectoral imbalances. As total goods trade has moved above €5 billion, the expansion has been driven almost entirely by imports, while export capacity continues to erode—raising questions about how long the current model can absorb shocks without greater financing reliance.

Import-led trade growth leaves exports near Europe’s lowest coverage

The latest figures show imports of approximately €4.46 billion, up more than 9% year-on-year, while exports have fallen to around €570 million, down roughly 7%. That puts Montenegro’s export coverage ratio at just 12–13%, described as among the lowest in Europe. The imbalance is not new, but its scale is becoming more pronounced as domestic demand—supported by tourism, real estate activity and consumption—outpaces the country’s ability to produce tradable goods.

A services-led model meets limits as electricity export margins compress

Structurally, Montenegro remains a services-dominated economy in which tourism and related capital inflows provide foreign exchange. Yet most of what households and businesses consume in goods terms is imported. Historically, this arrangement has been supported by strong seasonal revenues and foreign direct investment into coastal developments. The new data suggests that the buffer may be thinning.

Pressure is now extending into energy, which has previously acted as a partial offset to the trade deficit through electricity exports. Elektroprivreda Crne Gore, Montenegro’s state utility, recorded a €13 million loss in the first quarter of 2026 tied to early effects of the European Union’s Carbon Border Adjustment Mechanism. By pricing carbon emissions embedded in electricity exports, the mechanism compresses margins and weakens competitiveness for sales into EU markets.

Electricity exports have historically depended on hydrological conditions and could flex with generation strength. Carbon pricing changes that dynamic by reducing how much exporters can monetise sales even when output is high: buyers factor future carbon costs into their decisions. That further limits an already narrow export base and reinforces downward pressure on the goods trade balance.

External dependency deepens as financing needs rise

The implications are cumulative. With import growth continuing—driven by consumption, infrastructure investment and energy needs—and export revenues weakening, Montenegro’s goods deficit (already exceeding €3.5 billion) becomes increasingly reliant on external financing. Tourism receipts, remittances and foreign investment remain key stabilisers, but each channel carries its own volatility.

The economy is therefore becoming more externally dependent across multiple layers: it relies on tourism for foreign exchange while depending on imports for goods consumption; at the same time, one of its limited export levers—electricity—is increasingly constrained by carbon-related costs.

Asset valuations diverge between coastal tourism hubs and inland gateways

Capital markets are beginning to reprice Montenegro’s infrastructure assets in line with this economic reorientation. The valuation gap between Tivat Airport and Podgorica Airport illustrates how investors are anchoring expectations to tourism-linked cash flows rather than broader national fundamentals: Tivat is estimated to be about 2.5 times more valuable than Podgorica.

Tivat’s premium reflects its integration into an Adriatic luxury tourism corridor serving destinations including Porto Montenegro and Luštica Bay, where spending per visitor is significantly higher. Podgorica plays a more traditional role as a capital-city gateway with year-round traffic but lower revenue per passenger. The divergence mirrors wider economic bifurcation: coastal segments tied to tourism attract capital and support valuations, while inland and industrial areas—including goods production and energy exports—face structural headwinds.

Outlook: trade may keep expanding, but deficits risk widening without export capacity

The trajectory points to continued expansion in trade volumes that could reach €5.5–€6 billion in coming years. However, without a corresponding increase in export capacity, the deficit is likely to widen further. Even under optimistic scenarios, export coverage is expected to remain below 15%, leaving Montenegro structurally exposed to external shocks.

In practical terms, the challenge appears less about overall scale than composition: Montenegro’s growth model generates demand faster than it generates supply for tradable sectors. Imports rise with each phase of expansion while exports remain concentrated in sectors that are increasingly constrained—especially electricity under carbon pricing conditions—and concentrated within narrower channels linked to tourism.

The crossing of the €5 billion trade threshold therefore signals not a broadening of economic capability but a deepening of structural dependence: electricity can no longer reliably counterbalance imbalances as carbon constraints tighten; tourism remains supportive but seasonal and externally driven; and infrastructure valuations are increasingly anchored to coastal demand rather than national productivity. Together with energy transition costs and sectoral divergence, these dynamics are tightening links between short-term performance and long-term investment risk.