CBCG Council and Advisory Committee Meetings


The Council of the Central Bank of Montenegro (CBCG) adopted the Report on Macroeconomic Risks Analysis Results at today’s joint meeting of this body and the CBCG Advisory Committee.

The analysis identified and discussed the macroeconomic risks Montenegro is facing to be considered when making economic decisions. Therefore, the report will be sent to the Government of Montenegro, responsible for creating and conducting economic policies.

At the beginning of the meeting, Governor Žugić presented to the CBCG Council and Advisory Committee members the essential findings of the mentioned analysis. He emphasised that the identification of the risks does not mean that they will materialise. Still, the intention is to draw attention to them to plan and take preventive measures to minimise their potential adverse impact. The Governor also pointed out that the risks list is not final because new risks are constantly appearing.

The risks analysed in this study are divided into short-term and long-term macroeconomic risks, risks from the banking system, fiscal risks, inflation risk, and external risks.

The continued energy prices increase with limited availability on world markets, and the real sector’s low competitiveness have been identified as significant short-term macroeconomic risks. The long-term macroeconomic risks include a low degree of the domestic economy’s diversification, negative demographic trends, uneven regional development, climate change, and challenges in official statistics.

The banking sector has identified a risk of potential NPLs growth. It can be expected when the CBCG support measures are withdrawn or expire and in conditions of noticeable unemployment. At the same time, a part of the economy still faces corona crisis consequences. Other risks identified in the banking sector relate to excessive credit growth, banks’ exposure to the government, and variable interest rates growth.

Public debt is the primary fiscal risk. The announced fiscal reforms within the “Europe Now” programme bring potential ambiguity. Members of the CBCG Council and the CBCG Advisory Board welcomed the idea of these reforms. They assessed the announced improvement of the citizens’ economic position positive, especially those concerning the poorest categories. Moreover, the announced wage burden reduction, which is currently extremely high, benefits the economy, providing space for treating its key vulnerabilities - insufficient competitiveness and weakened liquidity, it was assessed at today’s meeting. However, the CBCG Council and the CBCG Advisory Board members opine that a detailed and multi-layered analysis should precede implementing such major reforms. It would consider possible sources of funding and accurately quantify the proposed measures’ impact.

They concluded that the pandemic had a strong negative impact on the Montenegrin economy, among other things, due to its high dependence on the service sector. Therefore, the development model should be changed, focusing on industries with comparative advantages and digitalisation and green economy, today one of the key instruments for achieving sustainable development. The current pandemic also pointed to the chances for the future development of Montenegro and the region through dislocating specific production processes from the Far East to the Western Balkans. It would contribute to shortening supply chains, whose current length and complexity proved to be a significant problem causing markets destabilisation.

It was assessed that the prepared material is of exceptional quality. It can represent a sound basis for creating and conducting a consistent and sustainable economic policy.

The Advisory Board is an advisory body of the CBCG. Its members are distinguished professors and former governors from the region and former members of the CBCG Council.