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07/04/2016

The CBCG Council met today for the 85th meeting chaired by the Governor Milojica Dakić.

The Council adopted the Central Bank of Montenegro Annual Report for 2015, Financial System Stability Report for 2015, and the Price Stability Report for 2015.

The Central Bank of Montenegro Annual Report for 2015 stated that the year was marked by satisfactory economic growth resulting from the intensification of almost all sectors of the economy. Preliminary Monstat data reveal that Montenegro's economy recorded a real growth rate of 3.2% in 2015. Annual growth was recorded in total industrial output, number of tourists, construction, forestry, trade and transport. In the previous year, the real sector liquidity moderately improved and international environment trends had no stable impact on Montenegro’s economy. Financial and banking sectors’ stability improved with an evident reduction of weaknesses referring to the area of banks’ credit risk. Increased investors’ interest was actualised through the opening of two banks and one microcredit institution. It was concluded that new challenges will stem from the fiscal area through deficit widening and public debt increase. These trends have marked the reporting year and confirmed that the post-crisis recovery of the economy is still in progress and that it calls for structural reform measures and changes in the growth model in the domestic environment in order to reinforce domestic economic capacities, boost competitiveness and foster growth potentials. 

It was rated that the activities the CBCG undertook in the previous year were aimed at safeguarding stability of the financial system by furthering and maintaining a healthy banking system and safe and efficient payment transactions. Accordingly, the CBCG’s key activities referred to preventive and supervisory activities, stabilisation and strengthening of the banking sector and encouraging healthy competition. In this reference, it is expected that the increased number of business entities in the banking sector will result in higher competitiveness and service quality, and lending under more favourable conditions. It was concluded that the regulatory activities of the CBCG were mainly determined by the position of Montenegro in the EU accession negotiation process. The Council found that CBCG’s activities were based on high standards of transparency and social responsibility. CBCG operated with a profit of 1.17 million euros.

The Financial System Stability Report for 2015 stated that the current risk level can be rated as moderate. It was underlined that the level of non-performing loans, which remains rather high despite the significant decline in the previous year, represents a vulnerability to the banking system. Financial result was negative on the system level, primarily due to the application of the Law on the Conversion of Swiss franc (Chf) -Denominated Loans Into euro (Eur)-Denominated Loans, which has had an extremely adverse effect on the operations of one bank. At the same time, in 2015, the banking system was highly liquid. In addition, the aggregate solvency ratio was significantly above the legally prescribed minimum. In this period, deposits, lending activity, and total assets and liabilities increased, while interest rates declined.

The Price Stability Report for 2015 stated that, following a negative inflation recorded in 2014, positive annual inflation rates were recorded in all the months of 2015. Annual inflation rate amounted to 1.4%, which is in line with the projections given in the Annual Price Stability Report for the previous year. In reference to the region, positive inflation rates were recorded in Serbia (1.5%) and Albania (2%), while they were negative in Macedonia (-0.3%), Croatia (-0.3%), Slovenia (-0.6%) and Bosnia and Herzegovina (-1.3%). A survey performed by the CBCG revealed that majority of banks and economic entities expected the annual inflation rate to range between 1% and 1.5% in 2016. CBCG’s expert assessment is that this range will be from 0.6% to 2.6%.