Size does not matter… at least that is the conclusion that can be drawn from the growth forecasts for this and the next in two of the countries that use the euro as a payment currency. These two small economies will grow more than Germany or France, which is true that they are not going through their best times, but they will also surpass Spain, Greece or Portugal. These two countries, which They would fit well into the province of Toledohave something that many desire: heavenly beaches and an immense cultural heritage.
This attraction boosts the economy of Malta and Montenegro (both EMEs), which in 2024 will welcome a number of tourists that will quadruple that of their population… this would be the equivalent of Spain receiving 160 million in one year. . tourists, 60% more than the official data. Tourism has become the new “golden goose”, in the sector that stimulates the economy of countries that can offer something to the traveler.
In the absence of industry, tourism is good, they will think about it Malta and Montenegro. Both countries, which together have barely one million inhabitants, will grow by more than 3% in 2024. In the case of Malta, a eurozone country, GDP will grow by 4.6% this year. Montenegro, meanwhile, will grow by 3.4% (after growing by 6% in 2023). In addition, the European Commission and the International Monetary Fund They predict that in 2025, growth in both countries will continue to exceed 3%.
The covid crisis continues to impact the consumption patterns of citizens who continue to prioritize spending on services after the “frenzy” of spending on goods that occurred during covid. When it was not possible to travel or go out, citizens increased their spending on electronic consumer goods. Today, even though the pandemic seems far away, consumers remain “obsessed” with leisure and pleasure, which allows countries with more tourism-intensive economies (where tourism weighs more in GDP) to enjoy a boom that does not seem to have any consequences. end.
Malta’s tourism boom
In 2023, the island’s real GDP growth was 5.6%, 1.6 percentage points higher than what the European Commission had predicted in the autumn. The agency admits that “private consumption and exports were much stronger than expected, due to significantly higher immigration and tourism flows”.
Tourism reached pre-pandemic levels in 2023. In addition, the number of Tourist arrivals increased by more than 26% in the first months of 2024In addition to the tourism boom, the European Commission says strong growth is also expected in exports of electronics and leisure products, as well as professional and financial services.
Overall, “construction investment is expected to stabilize and recover moderately after a sharp decline in 2023, with growth of 2.5% in 2024 and 3.9% in 2025. Private consumption is expected to increase, and activity in the services sector is expected to lead to a larger increase in imports of goods and services. Overall, GDP growth forecasts have been revised upwards, to 4.6% in 2024 and 4.3% in 2025,” it said.
The case of Montenegro is a little less striking, but it also deserves to be commented on. It is increasingly common to hear friends, family members, colleagues… who They will spend their holidays in Kotor or take a route through the Montenegrin mountainsA few years ago, no one would have known what Kotor was or whether Montenegro existed.
Montenegro suffered a 15.3% contraction in GDP in 2020, due to Covid. However, the economy recovered rapidly in 2021-22, with growth averaging 9.7% per year. Growth remained strong in 2023, at around 6%, driven by booming tourism and private consumption, and also supported by an influx of wealthy foreign migrants, mainly Russian and Ukrainian citizens.
Again, Montenegro has managed to reduce its public debt from 103.5% of GDP in 2020 to 60.7% in 2023largely due to strong nominal GDP growth. However, growth is expected to slow in the medium term, while financing needs are high due to large debt repayments in an uncertain global context. “Although extraordinary revenues led to a budget surplus in 2023, a return to budget deficits is expected in the medium term. Parliament approved the budget for 2024 with a budget deficit of 3.2% of GDP,” they point out from the World Bank.
Weaknesses to watch out for
Beyond the initial optimism, both countries still have serious weaknesses that must be taken into account. Despite the strength of the economy, the public deficit remains well above 3% of GDP and in the case of Montenegro there is also a current account deficit that exceeds 11% of GDP (the country only exports tourism) that must be covered each year with incoming foreign direct investment. Although the Balkan country has been facing large current account deficits for years, this generates a dependence on the outside world (dependence on these investments) that leaves this economy in a vulnerable situation to possible external shocks.
World Bank experts also stress this point: “Montenegro’s small, open, service-based economy is vulnerable to external shocks, and the country’s strategies and policies have not always been conducive to improving resilience,” they say.
“The growth outlook is positive, although it is threatened by an unfavourable global environment. Starting from a very high base, Growth is expected to moderate to 3.4% in 2024“The growth is still driven by private consumption and service exports, with a slight positive influence from investments in the tourism and energy sectors. Public investments should also contribute positively to growth,” the World Bank said.
