53rd Meeting of the Financial Stability Council
15/03/2021
Financial Stability Council held its 53rd meeting today, chaired by Radoje Žugić, Governor of the Central Bank and Chairman of the Council. The session attendees were also all other Council members: Milojko Spajić, Minister of Finance and Social Welfare, Uroš Andrijašević, President of the Council of the Insurance Supervision Agency, and Zoran Đikanović, President of the Capital Market Authority. Upon invitation, Predrag Marković, director of the Deposit Protection Fund, attends the Council’s sessions.
At today’s meeting, the Council discussed Information on Financial Stability for Q4 2020. It focused on the coronavirus pandemic impact on economic activity, public finances and overall financial stability in the country.
Discussing the trends in the domestic economy, it stated that the crisis was caused by the pandemic. It had an adverse impact on almost all economic sectors during Q4 2020. The decline in tourist turnover, measured through the number of tourist arrivals and overnight stays, was about 80% compared to 2019. Consequently, such a drastic reduction in turnover and income from tourism generated a significant increase in the current account deficit. According to preliminary data, this deficit amounted to 25.5% of GDP in 2020.
Consumption also declined in 2020, observed through a retail trade of 16.8% decline compared to 2019. The labour market also recorded negative trends, so the number of unemployed persons in Montenegro recorded an annual increase of 26.3%.
The crisis has worsened the public finances indicators. The budget deficit increased and amounted to 9.8% of GDP at the end of 2020.
Despite the negative trends during 2020, the Council expects that the Montenegrin economy will recover in the current year.
Banks showed good resilience to the crisis in 2020, maintaining a satisfactory liquidity and solvency level. There was a slight increase in non-performing loans, which, for now, does not have a systemic dimension. The insurance market is, for now, stable. According to the Insurance Supervision Agency data, all insurance companies are solvent, liquid and profitable. Risks that could jeopardise systemic stability have not been identified in the capital market.
Based on the impact analysis of various factors, the Council concluded that financial stability has been preserved for now. However, due to the high uncertainty of the pandemic and the existence of objective risks whose materialisation is possible, all actors in the financial sector must carefully monitor and consider in detail the signals from the market. They should take appropriate measures on time.