Governor Žugić at the Governors’ Club meeting in Bodrum

15/05/2018

The Governor of the Central Bank of Montenegro, Mr Radoje Žugić, is taking part at the meeting of the Governors` Club of the Central Asia, Black Sea Region and Balkan Countries, organised in Bodrum (Turkey) from 13 May to 15 May. This year's Governors' Club meeting is devoted to discussing the challenges and opportunities provided by the conditions in the global financial market, especially in terms of normalisation of monetary policy implemented by the major central banks of the world.

In his presentation, Governor Žugić stressed that normalisation of monetary policy should be implemented in a phased and transparent manner, with the ECB's timely announcement of all planned measures, in order to give the financial markets enough time to prepare. “The reduction in the ECB's balance sheet should be gradual and conducted over a longer period of time, to avoid endangering the financial markets. The reference interest rate should also be gradually increased and maintained below the pre-crisis level over a period of several years” the CBCG Governor said at a meeting in Bodrum.

While presenting the economic situation in Montenegro and influences of the global financial conditions it experiences, Žugić pointed out that, due to the interdependence of monetary, fiscal and macroprudential economic policies, the normalisation of monetary policy may have potentially adverse effects on public debt financing. Due to euroisation, the central bank does not have instruments "strong" enough for mitigating these effects. Therefore, the Governor stated that it is very important that fiscal consolidation measures are being implemented now, while the conditions in the financial markets are relatively favorable. On the other hand, Žugić stated that he believes that, “the effects of monetary policy normalisation on the banking sector in Montenegro will have a much smaller impact as the banks are well-capitalised, extremely liquid and with significantly reduced vulnerabilities compared to a few years ago."

Governors` Club of the Central Asia, Black Sea Region and Balkan Countries gathers governors and other high officials in the area of monetary policy and finances, aimed at exchanging opinions on current issues and further improvement of mutual cooperation. Membership in this prestigious organisation enables the CBCG to continue to strengthen regional cooperation in the monetary, financial and banking sectors and establish closer relations with central banks from the region.