Page 50 - Central & Southeast Outlook 2020

economic growth this year to be around 3.4-3.5% — a slowdown from last year’s 4.9% growth rate, despite the 5.2% advance posted in H1 (and even compared to the 4.8% y/y performance in January-September).
The GDP growth in the first three quarters of 2019 was superior to the government’s 4.2% full-year projection, while the World Bank’s cautious 3.4% forecast issued in October remains on the pessimistic side.
However, the World Bank’s forecast was assuming fiscal consolidation measures to be introduced by the government of pro-EU prime minister Maia Sandu that took office in July, after the pre-electoral fiscal stimulus and election-related spending seen by the World Bank as having driven the 4.1% y/y growth in Q1.
In fact, the growth rate strengthened under Sandu’s government during the second and third quarters, driven by lagged effects of past policies. More recently, with the change in government in November, the outlook changed from moderate fiscal consolidation to more fiscal stimulus. In fact, the new government informally headed by President Igor Dodon planned a budget deficit of 3.3% of GDP for 2020, one-third larger than in 2019, although the financing sources remain to be clarified.
While the long-term impact of the deep 2pp interest rate cut remains debatable, the move will provide safe and cheap financing from local resources for the government in case Moldova’s Western development partners freeze the financing on political concerns or the ambitious plans for $500mn worth of loans from Russia vanish. Separately, it will encourage retail lending with a positive impact on GDP.
1.8 ​Macro - Montenegro
Montenegro’s economic growth has slowed down as the construction of the first priority stretch of the key Bar-Boljare motorway is nearing its completion. ​After posting a robust 5.1% growth in 2018, the country’s economy slowed down in 2019 and is seen rising even less in 2020.
According to the International Monetary Fund (IMF), GDP will expand by 2.5% in 2020, below the 3% growth expected in 2019, but it should revive to 2.9% by 2024.
The World Bank has projected that Montenegro’s economy will average 2.8% growth through 2021. The phasing-out of the investment cycle that has driven growth for three years is likely to continue to slow growth in the coming years.
Although lower investment in infrastructure is slowing down growth, private consumption — supported by favorable labour market developments, increased lending, and booming tourism — will add
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