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Montenegro’s Real Estate Bucks the Trend with FDI Growth

In an economic landscape shadowed by declining foreign direct investments, Montenegro's real estate sector shines as a beacon of growth, defying broader market trends

In a year marked by cautious investments and economic recalibrations, Montenegro has witnessed a significant downturn in its foreign direct investment (FDI) flows. Preliminary data from the Central Bank of Montenegro (CBCG) indicates a sharp 45.23% decline in net FDI inflows in 2023, totaling €428.67 million, compared to the previous year. This contraction underscores a broader trend of retrenchment, with total FDI inflows (inclusive of outflows) plummeting by 25.59% to €856.99 million, primarily due to diminished investments in intercompany debt, and stakes in companies and banks, alongside a retreat of investments from abroad.

The landscape of investors reveals a diversified source pool, with Serbia leading at €125.2 million, followed closely by Russia, Turkey, Germany, and Switzerland. Notably, the United States and the United Arab Emirates also feature among the top contributors, highlighting a global interest in Montenegro’s economic prospects despite the overall downturn.

Photo: Andrey/Wikimedia Commons

A silver lining, however, is found in the real estate sector, which saw a modest 3.33% increase in investments, totaling €463.18 million. This contrasts starkly with the steep 56.58% fall in investments in companies and banks, underscoring a shifting focus towards tangible assets amidst economic uncertainties.

The intercompany debt sector also experienced a downturn, contributing 30.88% to the total FDI inflow but marking a 34.09% decrease from the previous year. Conversely, the total FDI outflow in 2023 escalated by 16.06%, with a notable drain of capital to Serbia, Turkey, and Switzerland, among others.

This investment trajectory signals a cautious approach by investors, driven by a combination of global economic challenges and local market dynamics. Montenegro’s FDI performance in 2023 reflects broader patterns of global investment flows, wherein investors are increasingly seeking stability and tangible value in uncertain times. As the country navigates this complex economic landscape, the focus will inevitably turn to strategies that can revitalise investor confidence and harness the potential of its sectors beyond real estate.

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