Following its declaration of independence in June 2006, Montenegro is now pushing for rapid accession to the EU. The country is currently undertaking a strict program of reform both politically and economically, while the euro is contributing to economic stability by removing exchange rate risks. Further positive factors include an average GDP growth rate of 4.5 % over the last three years, and in 2006, inflation of around 3 % and a 5 % fall in average unemployment to 14.7 %. The country’s budget situation is also encouraging, with a surplus achieved in the first 11 months of 2006. Foreign debt has fallen in the past two years from 32.75 % to 27.1 % of GDP (end of September 2006), which compares very favourably with other countries in the region. However, due to sharp increases in investments and private consumption, the current account deficit of 37.9 % in the first half of 2006 was far higher than the level in 2005 (8.6 % of GDP for the whole year).
      An unusually large increase in foreign investment has also taken place – in 2005, it totalled EUR 374.7 m (approximately 22.8 % of GDP), mainly as a result of privatisations, while the first half of 2006 saw investments of EUR 149.3 m, or 19.8 % of GDP in the period.
      Developments in the banking sector in particular have been very encouraging in the last two years as a result of investments, privatisations and the entry of foreign banks into the market. At the end of the third quarter of 2006, the total assets of the country’s ten banks amounted to 63 % of GDP (compared with 42.3 % at the end of 2005).
      Competition is currently far more intense than in the past, and the demand for loans has increased in line with rising investment in the tourism, retail and construction sectors. However, these developments and the rise in consumer borrowing (which last year mirrored the growth in deposits of around 150 %) have not resulted in higher inflation. On the other hand, despite continued improvements in the legal sector, banks and their customers still face high transaction costs arising from unresolved difficulties with property registration and the sluggish workings of the judicial system.
      Following the passage of a new leasing law at the end of 2005, leasing has been eagerly adopted as a new and alternative form of financing, as is illustrated by the company’s new financing volumes of EUR 61 m in 2006. On the whole, all companies which have entered the leasing market have experienced strong growth; Hypo Leasing Montenegro accounted for over half of total financing last year. The company sees itself not only as the market leader, but also as an innovation leader, and is constantly launching new products onto the market. Hypo Group Alpe Adria is represented in the Montenegrin market by Hypo Alpe-Adria-Bank a.d. Podgorica and Hypo Leasing d.o.o. Podgorica.