73rd meeting of the Central Bank Council
The Council of the Central Bank of Montenegro held its 73rd meeting, chaired by the Governor, Mr. Radoje Žugić.
At today’s meeting, the Council discussed and adopted the Report on Business Operations and Policy Implementation of the Central Bank of Montenegro for June-July 2020. The Report stated that the CBCG conducted its activities in accordance with the planned obligations. It particularly noted adequate management of international reserves, despite the deteriorated external conditions caused by the Covid-19 pandemic.
Discussing the banks’ performance indicators, the Council concluded that the banking sector had maintained stability and adequate capitalization and liquidity. Indeed, the Covid-19 pandemic had its impact on the trend of some banks’ operations indicators, primarily on profitability and the level of non-performing loans. The banks’ profit for the first six months was by 46% lower compared year-on-year, resulting from the decrease in net fee income and the growth of asset impairment costs. During the first six months of this year, non-performing loans and receivables at the system level increased from 4.72% to 5.11%.
Through intensive international activities, the CBCG has managed to provide a systemic liquidity support instrument from the European Central Bank for the first time. Namely, the contracting of a bilateral repo line of up to 250 million euros was approved. Earlier, the CBCG agreed a liquidity line with the Bank for International Settlements of up to 100 million euros. These two sources provide a robust framework to support systemic liquidity.
Today, the Council adopted the Central Bank of Montenegro Macroeconomic Report Q2 2020. The report stated that, due to the Coronavirus pandemic, the year 2020 will be a year of not only excellent health, but also economic challenges, and that the pandemic consequences will be quite strong and with an extended impact. Although GDP data for Q2 2020 are still not available, the available statistical indicators point to a significant decline in many sectors.
The Inflation Report for Q2 2020, adopted by the Council today, states that consumer prices decreased by 0.6% during the second quarter, primarily due to the decline prices under transport, clothing and footwear and housing, water, electricity, gas and other fuels. The average consumer price rate (first six months of 2020 compared to the same period last year) was 0.1%, while prices in June recorded a y-o-y decrease of 0.2%. The report further states that the model forecast predicts that inflation in December 2020 will range from -0.9% to 0.4%, with a central trend of -0.3%. The expert assessment of the CBCG is similar, and it indicates the inflation range from -1% to 1% at the end of the year, with a zero rate as the central projection.
At today’s meeting, the Council also discussed other issues within its competence.