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30/01/2023

The latest data on bank operations discussed at today’s meeting of the Council of the Central Bank of Montenegro showed that new loans amounted to almost 1.5 billion euros in 2022, over 30% more compared to 2021 and 18% more compared to the record year 2019.

Banks fully contributed to the domestic economy’s recovery through such intensive credit activity. According to banks’ preliminary data, the share of non-performing loans (NPL) in total loans, was 5.72% at the end of 2022 and was lower compared to the end-2021, when it was 6.17%. Despite the stricter regulatory framework, which implementation began in 2022, maintaining a relatively low NPL level resulted from the comprehensive CBCG activities.

Along with continued profitable operations, high liquidity, and good banking sector capitalisation expressed through a solvency ratio above 18%, deposits recorded an annual growth of almost 25% and amounted to 5.2 billion euros at the end of 2022.

The Council discussed the work-study Diagnostic Analysis of Inflation in Montenegro, which aims to examine the extent to which inflation in Montenegro depends on global factors and how much factors from the domestic market influence inflation. The study results showed that inflation in Montenegro is under the dominant influence of global factors, primarily rising food and oil prices on the international market. Analyses have shown that the domicile factor impacts inflation in times of tax and excise burdens increase or decrease. The Study results point to the necessity of implementing structural reforms in the public sector, especially in the social benefits system segment. Implementing structural reforms would open up space for applying a flexible fiscal policy in dealing with the adverse inflation effects and protecting the population’s living standards. On the contrary, increasing wages and social benefits to amortise the inflationary impact would only fuel inflation further.

At today’s meeting, the Council adopted the Report on Central Bank operations and implementation of the Central Bank Policy in November 2022. Data at the end of November of the previous year show that the number of economic entities with frozen accounts is increasing, as well as the total debt based on which the accounts were frozen, pointing to the worsening real sector’s liquidity. Current account deficit data, which amounted to almost 480 million euros at the end-September 2022 and increased over 90% compared y-o-y, is also worrying, despite the growing surplus on the services and remittances from abroad sub-account.

The Council adopted the Decision Amending the Decision on Statistical Data and Information to be Submitted by Credit Institutions to the Central Bank of Montenegro. The amended Decision was initiated to postpone the deadlines for submitting reports to provide credit institutions with additional time to standardise the internal systems development, which will guarantee the requested data quality.

The CBCG Council discussed other issues under its competence at today’s meeting.