Montenegro's Tourism Boom Eases As Prices Deter Visitors

In Montenegro, the money earned during the summer tourism season accounts for the bulk of personal income for the year. However, higher prices have slowed the number of visitors to the Balkan country.

"It is all about these few weeks," a young Montenegrin waiter in Budva, a town on the Adriatic Sea, said. "What we get through July and early August sets the tone for the entire year."

Budva, a picturesque coastal town with a population of 18,000, swells to at least double that size during the summer. Temporary staff arrive from sparsely populated northern regions and neighboring Serbia, working in numerous businesses often owned by foreign capital.

A daily rental for a beach bed can go as high as €200. Thus, a minimum monthly wage of €700 net buys exactly three and a half days at the beach. The latest data, as reported by the local news outlet vijesti.me, showed a nearly 3% drop in overnight stays in July, compared to 2024.

"It used to be different, prices were acceptable, but after 2020, people couldn’t wait to start travelling again," the waiter said. "Demand spiked and we got too greedy, pushing prices too high."

Montenegro's EU Accession Slowed by Russian Ties

With a population of just 623,000 and a gross domestic product (GDP) of $8.1 billion, Montenegro is small by European standards. The country has strived for EU membership by modernizing its economy, but remains grappling with deep-seated structural imbalances.

The rule of political instability, polarized politics, and persistent economic challenges has slowed the accession process. Pro-Russian political factions gained political influence in the 2020 parliamentary elections, raising concerns in Brussels and Washington.

Despite strong ties with European institutions and promises of new investment, the country's economic base has remained fragile and vulnerable to external shocks.

Economic growth slowed to 2.5% year-over-year in Q2 2025, marking the weakest pace since the COVID-19 pandemic. Inflation, high unemployment, and structural inefficiencies have weighed on its GDP.

Services, particularly tourism, have dominated the country's small and open economy. The sector contributes about 24.5% of GDP and employs more than one-fifth of the workforce.

However, with a quarter of the economy dependent on the service sector, Montenegro has remained highly exposed to global shocks.

Government Pushes for Higher Growth, But Without Productivity

Over the past two decades, officials in Podgorica, the capital, have promoted increased foreign direct investment. They have tried to spur GDP growth in construction, energy, and tourism.

But they didn't lead to corresponding productivity gains. When the projects ended or stalled, economic downturns followed.

The Bar-Boljare Highway, the country's largest infrastructure project, has been plagued by allegations of corruption and overspending. China's Export-Import Bank provided much of the $944 million financing for it.

Without significant reforms, Montenegro's GDP per capita of $12,900 would not catch up with the European Union's (EU) current average of $43,000 for decades.

To avoid this situation, the country must shift toward productivity-driven growth, according to The World Bank. The government must invest in education, digitalization, renewable energy, and innovation while protecting its natural resources.

Corruption Remains A Critical Problem for Montenegro

Since commencing accession negotiations in 2012, Montenegro has aligned much of its legislation with that of the EU. However, issues related to the rule of law, governance gaps, and institutional weaknesses have slowed progress.

Montenegro has faced challenges in addressing systemic corruption, organized crime, and ensuring judicial reforms. Transparency International ranked Montenegro 65th out of 180 nations in its Corruption Perceptions Index.

However, the EU has remained its most significant donor and financier.

The European Investment Bank (EIB), in collaboration with the EU, approved a €22.5 million grant in March for water and wastewater projects in the northern municipalities of Kolašin, Rožaje, and Mojkovac.

These efforts have aimed to improve living standards for 30,000 people, support sustainable tourism, and enhance resilience to climate change.

Domestic Imbalances in Development Persist

A heavy tilt toward tourism has significantly altered the country's internal economic balance.

Although the country's north holds significant natural resources, including hydropower, cultivable land, forests, and mineral reserves, it is the poorest region. More than 60% of Montenegrins living in poverty reside in the north.

Despite its vast potential for sustainable tourism, agriculture, and renewable energy, the region has been underinvested in and lacks adequate infrastructure, which has prevented it from contributing its fair share to national growth.

Meanwhile, urban sprawl, illegal construction (estimated at 30,000–100,000 structures), and deforestation put additional pressure on infrastructure, water systems, and natural resources.

The country remains one of Europe's least efficient users of energy and water.

Montenegro's Policies Look Good on Paper

On paper, Montenegro's policy has pulled ahead of other countries in the Western Balkans. It has improved its framework for tourism, trade, and innovation.

It has also performed the Western Balkans’ average in several categories, particularly tourism and employment.

Yet, the problems persist due to inefficient state-owned enterprises, weak tax and energy policies, underdeveloped digital infrastructure, and slow progress on decarbonization. The country still lacks a credible path away from fossil fuels.

Unemployment hovered near 11% in 2024, with young people facing particular difficulties. Many skilled workers emigrate, resulting in a brain drain and weakening the labor base.

Montenegro Has Obvious Economic Vulnerabilities

Montenegro's vulnerabilities are obvious—a narrow economic base, high external dependence, weak institutions, and governance challenges.

To align with EU standards and improve resilience, the government acknowledged the need to accelerate reforms by diversifying its economy beyond tourism, enhancing energy and water efficiency, digitalizing services, and addressing corruption and the rule of law.

The EIB's latest grant shows that Europe is ready to invest. However, the accession and convergence with EU living standards are still a long way ahead. To achieve this, Montenegro should adopt a consistent policy, overhaul its governance, and sustainably utilize its resources.

For the waiter working in the seaside town of Budva, any effort by the Montenegrin government to increase salaries and spur meaningful job creation would be welcomed.

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