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13/05/2019

The Council of the Central Bank of Montenegro (CBCG) held its forty-fifth meeting chaired by the Governor, Radoje Žugić.

On today’s meeting, the Council adopted the Central Bank of Montenegro Annual Report for 2018, the Financial Stability Report for 2018 and the Price Stability Report for 2018.

The Central Bank of Montenegro Annual Report for 2018 pointed out that the economic growth continued to rise. According to preliminary MONSTAT data, the annual economic growth was 4.9%. Even though the most of industries recorded positive trends, the key growth generating industries were construction, industry and tourism.

During the previous year, the banking system recorded positive trends thus, in the one-year comparative period, key balance positions recorded growth. Total assets of banks increased by 5.38%, loans increased by 8.47%, total bank deposits by 5.88%, while total capital increased by 0.28%. All asset quality indicators improved in 2018, with aggregate adequacy ratio amounting to 15.63% as at end 2018, being significantly higher than the statutory minimum of 10%.

The part of the Annual Report concerning the CBCG policy implementation estimated that the activities of the CBCG in 2018 were aimed at preserving the stability of the financial system by encouraging and maintaining a sound banking system and safe and efficient payment transactions. Accordingly, in 2018, the CBCG constantly worked on the identification of potential risks and guided activities on preserving the banking sector stability. To that end, the CBCG introduced interim administration in two banks in 2018 based on on-site inspections showing that both banks were critically undercapitalised and insolvent.

The Financial Stability Report for 2018 stated that the systemic risks were moderate in 2018. Cyclical vulnerabilities of non-financial sector mitigated owing to high economic growth rate of 4.9%. On the other hand, the public debt level remains a challenge despite the positive effect of fiscal consolidation measures on reducing the risk. Risks in the banking sector include the level on non-performing loans, despite their continuous decline. 

The report also pointed out that resolution of problems in IBM and Atlas banks did not have negative repercussions on the banking sector and the whole financial system of Montenegro. After imposing measures against these banks, positive trends that characterise the banking sector continued. The report concluded that banks were the most stable segment of the economic system, as reflected in the stability of operational indicators and asset quality.

The Price Stability Report for 2018 stated that positive annual inflation rates in 2018 were recorded in Montenegro, the countries of the region, and the most of EU Member States, primarily resulting from higher oil prices at the world market and higher prices of certain food products. Compared to 2017, higher inflation rate in Montenegro in 2018 was the result of import prices and administrative reasons (increase in VAT and excise duties). In December, annual CPI inflation was 1.6%, while HICP inflation was 1.5%. The average growth in consumer prices was 2.6% in 2018.

The CBCG survey showed that the most of banks and companies expected inflation to range between 1.5% and 3% in 2019. The CBCG expert assessment showed that the inflation would range between 0.5% and 2.5% in 2019.

On today’s meeting, the Council discussed the quarterly reports on bank’s and MFI’s operations, and other issues under its competence.