The current-account deficit contracted sharply in 2010, as exports rebounded robustly from the global economic downturn while import growth was constrained by depressed domestic demand, but it remained large, at the equivalent of an estimated 17.9% of GDP. We expect the trade deficit to shrink further 2011-12, as import demand remains initially weak and foreign sales of Montenegro's main exports, aluminium and steel, continue to recover. However, the rise in international oil and food prices in 2011 will limit the size of the contraction. In combination with recurring surpluses on income and transfers, revenue from services-primarily tourism, which will rebound, particularly as growth in the euro zone economies accelerates in 2012-will offset a larger share of the trade deficit. The annual average current-account deficit in 2011-12 is expected to shrink to the equivalent of 12.4% of GDP, as import demand remains depressed to start with, owing to a sluggish recovery in the construction sector and high unemployment in the aftermath the hesitant recovery from the recession. However, the deficit will remain large as a percentage of GDP, raising serious doubts as to its sustainability, and Montenegro may need IMF assistance to help to finance it.