SME Policy Index for Western Balkans and Türkiye 2026 – Economy Profile for Montenegro

Montenegro: SME sector overview

The SME landscape

Montenegro is a small, upper-middle-income economy with a population of approximately 623 500 and a gross domestic product (GDP) of EUR 7.6 billion in 2024. With a per capita income of EUR 12 260 – equivalent to 53.5% of the EU-27 average at purchasing power parity – Montenegro is the most converged economy among the six Western Balkans (WB6) economies (Eurostat, 2026[7]). The economic structure, however, raises questions about the sustainability of that convergence: services account for 78.8% of gross value added (GVA), with industry excluding construction contributing 8.3% and manufacturing just 3.3% – the narrowest industrial base in the WB6. Growth is anchored in tourism and the wider hospitality-real estate complex; goods exports represent only 8.6% of GDP (Eurostat, 2026[7]), and the current account deficit reached 17.1% of GDP in 2024 (European Commission, 2025[8]), signalling a model financed by foreign inflows rather than export-led productive capacity. The European Commission's 2025 Progress Report and the OECD Convergence Scoreboard both note that Montenegro's income lead within the region has not been matched by equivalent gains in structural competitiveness or productive diversification (European Commission, 2025[8]; OECD, 2025[9]).

The macroeconomic environment since 2021 has been broadly supportive of headline growth but has created persistent pressure on enterprise costs. Real GDP expanded by 3.2% in 2024, supported by strong tourism revenues and private consumption, and the economy has grown at an above-regional-average pace since the pandemic trough (Eurostat, 2026[7]). Set against this, consumer prices rose cumulatively by approximately 33.9% between 2019 and 2025, driven by the 2022 commodity shock and persistent services inflation thereafter, compressing margins across most of the small enterprise economy (Eurostat, 2026[10]). Labour market conditions have improved substantially: the unemployment rate fell from 17.9% in 2020 to 11.4% in 2024 (MONSTAT, 2026[11]), with total employment reaching 278 700.

Yet the structural weaknesses remain visible. The 2024 Q4 employment rate of 55.8% and activity rate of 63.1% (MONSTAT, 2025[12]) both stand well below the 2024 EU-27 benchmarks (Eurostat, 2026[13]); youth unemployment at 31.3% (Q2 2025) (European Commission, 2025[8]) is more than five times the EU average; and wage growth has outpaced productivity gains across most sectors, generating upward pressure on unit labour costs that disproportionately affects smaller firms with limited pricing power. The World Bank's latest regional assessment identifies Montenegro's tourism-intensive model as carrying elevated external demand and climate vulnerability, and cautions that sustaining convergence will require productivity-led growth beyond the service sector (World Bank, 2025[14]).

Structure and dynamics of the SME sector

Montenegro's business economy is almost entirely composed of micro, small, and medium-sized enterprises (MSMEs), which account for 99.9% of all active firms and 76.2% of gross value added within the Structural Business Statistics (SBS) economy (Figure 1), with the remaining 23.8% generated by just 59 large enterprises. The total enterprise population stood at 58 998 at the end of 2024, according to MONSTAT's business register, of which 58 604 are micro and small enterprises with fewer than 50 employees (99.3% of the total), and 335 are medium-sized (0.6%) (MONSTAT, 2026[6]). These value added shares considerably exceed EU-27 benchmarks, where MSMEs contribute roughly 51% of value added (Eurostat, 2026[15]), but their interpretation requires care. MSME dominance partly reflects the exceptional thinness of the large-firm segment rather than the absolute dynamism of smaller enterprises. The large-firm tier is concentrated in utilities, extractive industries and major hospitality operators, with limited capacity to anchor domestic supply chains or generate forward linkages for MSME suppliers.

Two structural features of the available data shape the analysis throughout this chapter: MONSTAT's SBS combines micro and small enterprises into a single 1-49-employee class, preventing separate analysis of the two sub-segments, and does not publish employment headcount, reporting labour costs rather than persons employed. Employment data are available from a separate source, the Tax Administration (UPC) register, and are presented in the sections that follow. However, the two sources use different definitions of active enterprise status and cannot be directly combined without methodological reconciliation.

Figure 1. Business demography indicators in Montenegro, 2021 and 2024

Source: MONSTAT (2026[6]).

Enterprise formation has been exceptionally rapid, though its drivers go beyond organic domestic entrepreneurship. The total number of active SBS enterprises grew from approximately 39 682 in 2021 to 58 998 in 2024, a compound annual growth rate of 14% (MONSTAT, 2026[6]) (Table 4), pushing enterprise density to 89.7 per 1 000 inhabitants, roughly double the EU-27 average of 50-60 (Eurostat, 2026[15]). A significant share of this growth reflects business registrations by foreign nationals – particularly from the Russian Federation, following 2022, and more recently from Türkiye – many of whom have established companies in connection with residency permit requirements, a trend that the authorities are currently reviewing. The dominant size profile is consistent with this: the average micro firm employs 1.8 persons, pointing to a population of largely owner-operated businesses rather than growth-oriented ventures (Government of Montenegro, 2020[16]). Geographically, more than half of all enterprises are registered in just two municipalities – Podgorica (35.5%) and Budva (19.9%) (MONSTAT, 2025[5]) – a concentration that raises questions about the territorial balance of entrepreneurship and the capacity of less-developed regions to sustain viable local business ecosystems.

Investment data further reveal a structural divergence and point to a recomposition of capital formation. Within the SBS economy, investment by micro and small enterprises grew at 28.6% per year between 2021 and 2024 (Table 4), from EUR 119 million to EUR 252 million, making them the largest single investor group by 2024, with 41% of total SBS investment, up from 24% in 2021. Medium enterprise investment grew modestly (5.0% per year, accounting for 39% of total investment). Most notably, large enterprise investment contracted at -10.3% per year, from EUR 165 million to EUR 119 million and from a 34% share to 19% (MONSTAT, 2026[6]), suggesting that major capital projects have concluded without equivalent replacement.

Table 4. Compound annual growth rate by size class and indicator, Montenegro, 2021-2024

Indicator	Small and micro (1-49 employees)	Medium (50-249 employees)	MSME total	Large (250+ employees)	Total
Number of enterprises	+14.2%	+4.1%	+14.1%	+3.0%	+14.1%
Labour costs	+21.1%	+19.2%	+20.5%	+17.3%	+19.7%
Gross value added	+20.2%	+24.3%	+21.7%	+13.5%	+19.6%
Investment	+28.6%	+5.0%	+14.7%	-10.3%	+7.6%

Source: MONSTAT (2026[6]).

The employment data reveal that the MSME sector is growing in headcount but shrinking in average firm depth. Total MSME employment reached 149 615 in 2024, virtually unchanged from 2019 (+0.2%), but this aggregate masks a complete internal recomposition across size classes. Microenterprise employment expanded by 34.6% relative to 2019, with the recovery from the pandemic trough accelerating to +10.5% per year between 2021 and 2024. Small enterprise employment, by contrast, remains 17.4% below its 2019 level despite a nominal post-pandemic rebound (+9.0% per year since 2021). Medium-sized firms present the starkest case: employment stands 30.2% below 2019 (+4.3% per year since 2021), a loss of more than 12 000 jobs that five years of economic recovery have not reversed. The fact that the average employment per medium firm has remained stable at around 101 persons points to firm exits rather than downsizing as the driver. On the other hand, the average micro firm employs just 1.8 persons, down from 1.9 in 2021, consistent with a population of largely owner-operated businesses rather than enterprises with scale-up potential. These dynamics are presented in Table 5 (Government of Montenegro, 2020[16]).

Table 5. MSME employment by size class, Montenegro, 2021 and 2024

	Persons employed1			Average employees per enterprise2
Size class	2024	CAGR 2019-2024	CAGR 2021-2024	2024	2021	Change
MSME total	149 615	0.0%	+8.8%	3.1	3.4	-8.8%
Micro (1–9 employees)	81 545	+6.1%	+10.5%	1.8	1.9	-5.3%
Small (10–49 employees)	39 414	-3.7%	+9.0%	18.9	18.5	+2.2%
Medium (50–249 employees)	28 656	-6.9%	+4.3%	101.3	99.8	+1.5%

Notes:

1. Persons employed from the Tax Administration (UPC) register as published in the Annual Competitiveness Programme. Compound annual growth rate (CAGR) 2019-2024 calculated over five years; CAGR 2021-2024 over three years; both nominal. 2019 reference: MSME total 149 375; small 47 698; medium 41 072. Micro 2019 is not separately available in UPC.

2. Average employees per enterprise is persons employed divided by the number of UPC-registered enterprises in that size class. UPC firm counts (48 131 MSMEs in 2024) differ from MONSTAT Business Register (58 998) by 18.4%; these data should not be combined with MONSTAT SBS financial figures without reconciliation.

Source: Government of Montenegro (2025[17]).

Taken together, these findings point to an enterprise economy that is widening at the base but not deepening. The micro tier is expanding rapidly in both firm count and employment, but average firm size is declining, and a meaningful share of recent registrations reflects foreign residency strategies rather than growth-oriented entrepreneurship. The middle tier – which, in more developed economies, bridges micro-scale activity and internationally competitive firms – has shed jobs since 2019 without a recovery, while large enterprises are withdrawing capital rather than expanding their anchoring role in the economy. The result is a structural profile in which the development constraints differ sharply by size class, and where aggregate indicators of enterprise dynamism mask underlying fragmentation rather than reflect it.

The sectoral composition of Montenegro's enterprise economy is heavily concentrated in services, with wholesale and retail trade, tourism, and professional activities together accounting for more than half of all enterprises and a similar share of gross value added. Trade (NACE G) alone accounts for 27.1% of enterprises and 26.7% of SBS GVA, the largest sector by both measures. Accommodation and food services (I) account for 11.8% of enterprises and 12.1% of GVA, reflecting the tourism sector's weight in the economy. Professional, scientific and technical activities (M) form the third-largest group by enterprise count (13.7%) but generate only 6.8% of GVA, pointing to many small-scale consultancy, legal and accounting practices with below-average output per firm. Construction (F) presents a similar pattern: 11.8% of enterprises, 6.5% of GVA. The sectoral structure is illustrated in Table 6. Together, the eight main sectors shown account for approximately 82% of SBS enterprises and 84% of SBS GVA (MONSTAT, 2026[6]).

Table 6. Sectoral profile of Montenegro’s business economy, 2024 shares and 2021-2024 growth

Sector (NACE Rev. 2)	Share of Structural Business Statistics (SBS) economy (2024)1				Compound annual growth rate (CAGR) 2021-20242
	Enterprises	Gross value added	Labour costs	Investment	Gross value added	Labour costs
G – Wholesale and Retail Trade	27.1%	26.7%	24.5%	15.9%	+18.2%	+21.0%
I – Accommodation and Food Services	11.8%	12.1%	11.2%	9.0%	+29.4%	+33.8%
J – Information and Communication	6.5%	8.9%	8.8%	8.9%	+32.2%	+29.6%
H – Transportation and Storage	4.4%	8.5%	8.5%	5.2%	+21.4%	+16.3%
C – Manufacturing	6.4%	7.4%	6.2%	5.4%	+23.9%	+15.3%
M – Prof., Scientific and Technical	13.7%	6.8%	7.5%	1.5%	+19.0%	+23.6%
F – Construction	11.8%	6.5%	8.1%	12.0%	−1.2%	+7.2%
D – Electricity, Gas and Steam	0.4%	5.2%	3.8%	18.0%	+5.8%	+11.3%
Other (B, E, L, N, P, Q, R, S)	17.9%	17.8%	22.6%	22.5%	–	–
Total SBS economy	100%	100%	100%	100%	+19.6%	+19.7%

Notes:

1. Enterprise shares as a percentage of total registered enterprises (58 097 SBS-covered). Gross value added, labour cost and investment shares as a percentage of respective SBS totals (Gross value added: EUR 3 697M; labour costs: EUR 2 224M; investment: EUR 610M).

2. Nominal CAGR 2021-2024; “Other sectors” CAGR not calculated due to heterogeneity.

Source: MONSTAT (2026[6]).

Two sectors stand out for their structural significance beyond their enterprise share: information and communication technology (ICT) and transportation. Information and communication (NACE J), with 6.5% of enterprises, generates 8.9% of SBS GVA, a disproportionate contribution that reflects the higher output per firm characteristic of technology-based activities. Transportation and storage (H) likewise account for 8.5% of GVA, representing 4.4% of enterprises, driven by logistics and port-related activities. Manufacturing (C) is comparatively modest, accounting for 6.4% of enterprises and 7.4% of GVA, equivalent to an estimated 3.3% of total GDP, confirming the narrow industrial base identified in the macroeconomic overview. The electricity sector (D) generates 5.2% of SBS GVA from just 0.4% of enterprises, reflecting its capital-intensive structure (MONSTAT, 2026[6]).

Labour cost efficiency as a productivity proxy

As MONSTAT does not publish employment headcount within its SBS framework, this section uses the ratio of GVA to labour costs as a proxy for labour productivity across size classes.

Montenegro's strong nominal growth has not translated into a more productive enterprise economy. Wages have risen faster than the value firms actually create, and only the medium tier has managed to stay ahead of that pressure. Between 2021 and 2024, micro and small enterprises saw their value added efficiency ratio decline from 1.55 to 1.51, while large firms' ratio deteriorated more sharply, from 1.78 to 1.61. Medium-sized firms moved in the opposite direction, from 1.79 to 2.03, emerging as the most efficient segment in the economy by a considerable margin, a position they did not hold in 2021. The result is an inverted hierarchy: in a context where most firms struggled to keep value creation ahead of rising wage costs, it is the middle tier – not the large-firm segment – that has absorbed the pressure most effectively (Table 7) (MONSTAT, 2026[6]).

Table 7. Value added efficiency by size class, Montenegro, 2024 and 2021-2024 change

	Micro and Small (1-49 employees)		Medium (50-249 employees)		Micro and MSME total		Large (250+ employees)
Indicator	20241	CAGR2	20241	CAGR2	20241	CAGR2	20241	CAGR2
Level (EUR millions, current prices)
Gross value added (GVA)	1 704	+20.2%	1 112	+24.3%	2 816	+21.7%	881	+13.5%
Labour costs	1 129	+21.1%	548	+19.2%	1 677	+20.5%	546	+17.3%
Value added efficiency (GVA / Labour costs)3
Ratio (2024)	1.51	–	2.03	–	1.68	–	1.61	–
Change vs. 2021	1.55 → 1.51	−0.9%/yr	1.79 → 2.03	+4.3%/yr	1.63 → 1.68	+1.0%/yr	1.78 → 1.61	-3.3%/yr
MSME vs. large4	93.8%	–	126.1%	–	104.3%	–	100%	–

Notes:

1. GVA at factor cost and labour costs in EUR millions at current prices.

2. Nominal compound annual growth rate (CAGR) 2021-2024; cumulative consumer price index (CPI) 2019-2025 approximately 33.9%, implying real growth rates roughly 10 percentage points lower.

3. Value added efficiency is GVA divided by labour costs; used as a proxy for labour productivity (GVA per person employed) because employment headcount is not published in MONSTAT Structural Business Statistics (SBS). Higher values indicate greater output generated per unit of wage expenditure.

4. Micro, small and medium-sized enterprise (MSME) GVA/labour costs ratio expressed as a percentage of large enterprise GVA/labour costs; values above 100% indicate MSMEs outperform large firms on this measure. For context, in the EU-27, MSMEs typically reach 60% of large enterprise productivity levels.

Source: MONSTAT (2026[6]).

The medium enterprise efficiency premium most likely reflects sectoral composition rather than a scale advantage that is broadly replicable. Medium-sized firms are disproportionately represented in energy distribution, capital-intensive manufacturing, and larger hospitality operations, all sectors with high capital-to-labour ratios and comparatively inelastic labour costs (LC). The large enterprise deterioration is similarly composition-driven: the segment is dominated by utilities and extractive industries whose GVA has grown more slowly than their wage bills, consistent with the electricity sector's GVA/LC ratio falling from 2.67 to 2.31. The slight decline in the micro and small segment is consistent with sectoral evidence. Most of these firms operate in trade, construction, and professional services, precisely where GVA/LC deterioration has been sharpest. The investment data reinforce this picture: large enterprise capital formation contracted by 10.3% per year between 2021 and 2024, while micro and small investment surged by 28.6%, a rebalancing that reflects the same compositional dynamics rather than a reversal of underlying structural trends.

SME outlook

Montenegro's MSME sector is caught between two contradictory signals. The enterprise base is expanding at an exceptional pace – density has reached 89.7 firms per 1 000 inhabitants, roughly double the EU average – yet this expansion is concentrated almost entirely in micro-firms averaging fewer than two employees, many of which were registered to meet residency requirements rather than for commercial purposes. Meanwhile, the segment that matters most for productivity and employment – medium-sized firms – has shed more than 12 000 jobs since 2019 in what looks less like a cyclical setback than a structural retreat. Large enterprises, few and concentrated in non-tradeable sectors, have withdrawn from investment rather than deepening their role as anchors for domestic supply chains. The result is an enterprise economy where aggregate indicators point upward while the underlying composition moves in the wrong direction (MONSTAT, 2026[6]; Eurostat, 2026[15]).

The policy framework has genuinely strengthened. The provisional closure of the EU accession chapter on enterprise and industrial policy in December 2024 is a tangible marker of progress, and the Development Bank's EUR 200 million portfolio, with 90% allocated to SMEs, expands the financial toolkit available to the sector. Yet the conditions for broad-based upgrading remain constrained. Access to external finance is still largely mediated through bank lending secured against physical collateral; non-bank instruments remain underdeveloped; and the credit information infrastructure covers fewer than half of the adult population – gaps that disproportionately affect precisely the micro and small firms that now dominate the enterprise base. ICT stands as the clearest evidence that a different trajectory is possible: it is the one sector where value added efficiency has consistently run ahead of wage growth, and where the Science and Technology Park's operationalisation in June 2024 and the Innovation Fund's growing programme portfolio provide a credible ecosystem foundation. Extending the ICT model to other sectors will test whether Montenegro's institutional capacity can match its strategic ambition, a question the assessment addresses across the dimensions below.

With a working-age population that is both small in absolute terms and under-utilised, Montenegro has little demographic margin for a slow transition. Brain drain is depleting precisely the occupations – technology, engineering, applied sciences – that growth-oriented SMEs require, while youth unemployment is at 31.3% (MONSTAT, 2025[12]), signalling a structural mismatch between what the education system produces and what the labour market needs. The green and digital adjustments that EU integration will require are capital- and skills-intensive; most of the micro and small enterprises that now dominate the sector are positioned for neither. The structural profile documented in this overview, a dense but shallow base, a contracting middle, and a thin, large-firm tier pulling back from investment, will persist unless the instruments now in place are matched by sustained implementation effort and adequate institutional capacity.

References

[3] Assembly of Montenegro (2022), Law on Accounting, No 145/2021 of 31 December 2021, 152/2022 of 30 December 2022, https://www.cbcg.me/slike_i_fajlovi/eng/fajlovi/fajlovi_brzi_linkovi/propisi/laws/law_on_accounting_unoff_consol_152-22.pdf.

[8] European Commission (2025), Montenegro 2025 Report, https://enlargement.ec.europa.eu/montenegro-report-2025_en.

[1] European Commission (2003), Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises, Official Journal of the European Union, L 124, 20 May, Brussels, https://eur-lex.europa.eu/eli/reco/2003/361/oj/eng.

[10] Eurostat (2026), Harmonised Index of Consumer Prices (HICP) (database), https://ec.europa.eu/eurostat/web/hicp.

[4] Eurostat (2026), International trade in goods by enterprise characteristics, https://ec.europa.eu/eurostat/web/international-trade-in-goods/database (accessed on 5 February 2026).

[13] Eurostat (2026), Labour Force Survey – employment and unemployment (database), https://ec.europa.eu/eurostat/web/lfs.

[7] Eurostat (2026), National accounts (database), https://ec.europa.eu/eurostat/web/national-accounts/database.

[15] Eurostat (2026), Structural Business Statistics (SBS) (database), https://ec.europa.eu/eurostat/web/structural-business-statistics.

[2] Government of Montenegro (2025), Law on Accounting, Official Gazette of Montenegro, No. 84/25, https://www.sluzbenilist.me/propisi/319422.

[17] Government of Montenegro (2025), Programme for Improving the Competitiveness of the Economy 2025, https://www.gov.me/en/documents/3387e0c0-ada9-4e15-87ee-efb81449589a (accessed on 5 February 2026).

[16] Government of Montenegro (2020), Programme for Improving the Competitiveness of the Economy 2020-2025, Government of Montenegro.

[11] MONSTAT (2026), Labor Force Survey, https://monstat.org/uploads/files/ARS/2025/3/ARS%20podaci.xls.

[6] MONSTAT (2026), Structural Business Statistics, https://monstat.org/eng/page.php?id=1415&pageid=1415.

[12] MONSTAT (2025), Labour Force Survey, https://monstat.org/eng/page.php?id=1914&pageid=22.

[5] MONSTAT (2025), Number and structure of business entities in Montenegro, https://monstat.org/uploads/files/publikacije/registri/Broj%20i%20struktura%20poslovnih%20subjekata%20u%20Crnoj%20Gori%20%202026.god.ENG.pdf (accessed on 5 February 2026).

[9] OECD (2025), Economic Convergence Scoreboard for the Western Balkans 2025, OECD Publishing, Paris, https://doi.org/10.1787/bc0babf3-en.

[14] World Bank (2025), Western Balkans Regular Economic Report No. 28, Fall 2025: Towards Better Jobs, World Bank, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099100625100539134.