May 2, 2020 - The Montenegrin economy is likely to be struck by the outbreak of the COVID-19 epidemic due to high dependency on tourism, said the head of the European Bank for Reconstruction and Development- EBRD office in Montenegro, Jap Spray, adding that recovery is expected next year.
Spray said tourism revenue would decline significantly this year because tourists from major markets may not be able to travel due to measures to contain or reduce their income.
He stated that the COVID-19 pandemic has hit a continuing slowdown in global growth as well as global trade growth and is expected to result in a significant decline in production, at least in the short term.
"The overall effect will depend on the length of the blockade measures and the structure of the economies themselves. A longer duration of isolation could result in a prolonged recession, while countries with a high share of tourism and other, mostly personal services, in GDP, may be more severely affected," Spray said.
According to Spray, cautious mitigation has begun in Montenegro, and rapid recovery is possible provided mass release is avoided while the blockage phase is underway.
"However, these estimates are driven by unprecedented uncertainty, and there may be significant long-term economic, political and social impacts," Spray said.
Asked how much money the EBRD could lend to Montenegro to help the country cope with the effects of the coronavirus epidemic, Spray replied that the institution had signed ten projects last year and invested nearly 40 million euros.
"Before the COVID-19 pandemic, we planned almost to double our business volume, bringing it to the level of EUR 75 million. We are now on track to make it more than triple last year's amount by investing over € 120 million in existing and new clients," said Spray.
"With the arrival of COVID-19, our clients needed short-term liquidity, and we began to prepare working capital programs for our clients in the private and public sectors with whom we work directly," Spray explained.
The EBRD, in addition to finance, provides advice to SMEs to help them recover from the economic downturn resulting from the pandemic, including refocusing ongoing projects on critical financial management and business continuity issues.
"We have several significant projects in the field of renewable energy, tourism, and real estate, which we hope will be successfully implemented in the coming year. We will continue to strengthen agricultural chains and the linkage between agriculture and the tourism sector," Spray said.
The EBRD recently approved an increase in funding to support the developing economies in which the bank operates, to EUR 21 billion this year and next.
The EBRD, according to Spray, is adapting and scaling up existing instruments and developing new financial and policy support initiatives to prevent the immediate coronavirus threat to the economy.
"Under certain conditions, we can now also provide liquidity to municipalities to help maintain basic public services. We provide assistance to all sectors of the economy, especially those severely affected by the crisis with a focus on SMEs. The sectors include financial institutions, tourism, hospitality, manufacturing, and agribusiness," concluded Spray.