CBCG – ECB Meeting: Sustainable Fiscal System and Healthy Banking Sector - Preconditions for Montenegro’s Recovery


Representatives of the Central Bank of Montenegro (CBCG) and the European Central Bank (ECB) held a video conference dedicated to the high-level dialogue the ECB regularly holds with the central banks of the candidate countries for European Union membership which have opened accession negotiations. The ECB delegation was led by Fabio Panetta, Member of the ECB Executive Board, and Isabel Vansteenkiste, Director General International and European Relations.

The dialogue topics were economic and financial developments in Montenegro and in the euro area.

Governor Žugić presented the latest data depicting the banking, fiscal and real sectors’ condition to the ECB representatives. “After a deep recession in 2020, the Montenegrin economy is slowly recovering. It is confirmed by official MONSTAT data on 10.3% growth in the first half of this year,” said Governor Žugić, adding that the CBCG forecasted growth above 11% in 2021. The CBCG sees substantial challenges in the fiscal sphere, primarily in public debt that remains the most significant systemic risk. In contrast, the announced fiscal reforms within the “Europe Now” programme bring potential ambiguity.

Montenegro’s banking sector is stable and liquid, and all key soundness indicators have positive trends. It was pointed out that non-performing loans growth can be expected after the withdrawal and expiration of the CBCG support measures, while the economy still faces continued Covid-19 crisis consequences and pronounced unemployment. The CBCG closely monitors and analyses the indicators’ trend and will react on time, if deemed necessary.

The Governor informed ECB representatives about the intensive activities of the CBCG during the previous and current year. These activities include creating and implementing ten sets of measures to combat the pandemic effects, implementing the asset quality review project, improving the regulatory framework, strengthening supervision, and preventing money laundering.

The CBCG Vice Governors Nikola Fabris, Miodrag Radonjić and Zorica Kalezić presented the macroeconomic trends in Montenegro, international reserves management and the effects of the CBCG monetary policy. They also informed about the current CBCG activities prioritising further regulation improvement, payment system modernisation, and establishing a framework to support Fintech innovation.

The ECB staff provided an overview of econonomic and banking sector developments in the euro area and the outcome of the ECB’s monetary policy strategy review.

Mr Panetta stressed that the ECB, in its area of competence, remains committed to supporting Montenegro to make further progress towards accession to the European Union through continued cooperation with the CBCG.