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05/12/2017

The 37th session of the Financial Stability Council was held today, chaired by Mr Radoje Žugić, Governor of the Central Bank and Chairman of the Council. All other members of the Council also attended the session, Mr Darko Radunović, Minister of Finance, Mr Branko Vujović, President of the Insurance Supervision Agency Council and Mr Zoran Djikanović, President of Securities and Exchange Commission. Upon invitation, Mr Predrag Marković, Director of Deposit Protection Fund, is present at the Council sessions.

In order to assess the financial stability, trends that characterize the domestic macroeconomic environment and the financial system were discussed at today`s session, including events and potential risks that may have consequences for systemic stability.

It was stated that the growth of economic activity continued in the third quarter. Growth in construction, tourism, transport and retail trade was achieved in the first nine months of this year. Despite the many positive trends that characterize the real sector, its liquidity remains a risk.

The growth trend is accompanied by foreign direct investments, with net inflow, according to preliminary data, amounting to EUR 311.7 million in the first nine months of 2017, being an increase of 10.6% over the same period last year. Risks arising from the economic foreign trade were moderate.

As for the banking sector, growth trend of both approved loans and deposits continued in the third quarter. On the other hand, the level of non-performing loans registered a fall, which was contributed by the implementation of amendments to the Law on Voluntary Financial Restructuring of Debt towards Financial Institutions. Therefore, non-performing loans amounted to EUR 194.2 million at end-October this year, accounting for 7.1% of total loans, which is a decrease of 25.9% on an annual basis. Indicators in the insurance market have a positive trend, while the situation on the capital market has remained unchanged.

Based on the analysis of the impact of all mentioned factors on the position of overall economic stability, with particular emphasis on the stability of the financial system, the Council concluded that the financial system is relatively stable and that there are moderate risks.

It was agreed to continue with activities to cope with the vulnerability of the real economy, primarily through continued implementation of measures aimed at narrowing the informal economy zone, as well as by considering the possibility of reducing the contribution rates on wages and a slightly increasing the minimum wage. To that end, it was emphasized as being necessary to prepare a detailed analysis and quantification of the impact of the proposed measures on generating public revenues in order to harmonize the objectives of improving competitiveness and fiscal consolidation, that is, not to reduce public revenues on that basis.