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07/07/2017

The 35th session of the Financial Stability Council was held today, chaired by Mr Radoje Žugić, Governor of the Central Bank and Chairman of the Council. Other members of the Council also attended the session, Mr Darko Radunović, Minister of Finance, and Mr Branko Vujović, President of the Insurance Supervision Agency Council. Upon invitation, Mr Predrag Marković, Director of Deposit Protection Fund, is present at the Council sessions.

At today's session, the financial stability condition for the first quarter of 2017 was considered. Within this analysis, impacts from the international and local macroeconomic environment, as well as from the financial sector, were considered, including risks and potential vulnerabilities that may have implications for systemic stability.

It was noted that moderate economic growth in the Eurozone countries continued in the first quarter of this year, which is the fourth year in a row that the quarterly growth rates of GDP were positive. As for other influential economies, the US and China are seeing stronger economic growth in the first quarter of this year, while Russia is emerging from a recession, achieving a growth of 0.3% in the last quarter of 2016, after seven consecutive quarters in which there was a decline. In line with these trends, the ECB kept the same level of interest rates, while the FED increased the reference interest rate, which in the future could affect the growth of the EURIBOR value, which is still in the negative zone.

Regarding the domestic macroeconomic environment, the Montenegrin economy achieved real economic growth of 3.2% in the first quarter of this year, according to MONSTAT estimates. It was concluded that the sectors of construction and tourism had a dominant positive impact on the achieved growth.

Also, the announced fiscal consolidation measures will have a strong impact on the expected growth by the year end, which the Council concluded as being adequately and carefully created, and that they achieve a balance between their positive impacts in reducing the fiscal risks in the system and the negative impact of the same aggregate demand and the living standard of the population. The fiscal consolidation burden is allocated to the economy, the population and the public administration, and the savings achieved in the amount of 2.1% of GDP in the next three-year period is positively assessed by the relevant financial institutions. The Council concluded that, when implementing the announced fiscal consolidation measures, it is necessary to take into account the risk of potential growth of the non-observed economy, and therefore continue the activities for its further suppression.

When it comes to the situation in the financial sector, the indicators of stability and quality of operations in the banking, insurance and capital markets are positive and they recorded positive tendencies.

Based on the analysis of the impact of international and domestic factors on the overall economic stability situation, with particular emphasis on the stability of the financial system, the Council concluded that there are positive trends, but that certain risks are still evident. The financial system is rated stable.