Discussion of Governor Žugić and his team with the ECB representatives


The representatives of the Central Bank of Montenegro (CBCG) and the European Central Bank (ECB) held a high-level dialogue videoconference. The ECB delegation was led by Fabio Panetta, Member of the ECB Executive Board, and Hans Joachim Klöckers, Director General International and European Relations at the ECB.

Governor Žugić presented to the ECB representatives the latest data on the situation in the Montenegrin economy, with special emphasis on the of the coronavirus pandemic impact on the economy, fiscal and financial sectors. “Montenegrin economy will fall sharply in 2020 due to the negative impact of the coronavirus pandemic,” said Governor Žugić, adding that the official MONSTAT data point to a 10.3% in H1 2020. The CBCG estimated that the decline would be around 17% in 2020. According to Žugić, there are significant challenges in the fiscal sphere where unforeseen expenditures and falling budget revenues have led to a deficit increase, further reflected on the public debt growth.

“So far, banks have shown high resilience to the coronavirus pandemic crisis. This resulted from the previous successful consolidation of the sector and the proactive acting of the CBCG. Since the beginning of the crisis, the CBCG has implemented five packages of measures aimed at strengthening the banks’ liquidity and solvency and the strong support to the real sector and citizens,” said Governor Žugić.

Governor Žugić thanked the ECB representatives for the previously agreed repo line under the EUREP facility with the possibility to withdrawing funds of up to 250 million euros to support systemic liquidity.

During the meeting, the Vice Governors of the CBCG, Nikola Fabris, Miodrag Radonjić, and Zorica Kalezic presented to the ECB representatives the macroeconomic trends in Montenegro, the management of the international reserves, and the effects of the CBCG monetary policy. They also informed on the current activities of the CBCG primarily focusing on the implementation of the asset quality review (AQR) of the banking system, further legislation strengthening and payment system modernisation.

During the dialogue, ECB representatives explained the economic and financial situation in the euro area. 

Representatives of the ECB acknowledged the rationale of the measures adopted by the CBCG and the Government of Montenegro. They pointed out that it was necessary to consider new challenges that the crisis would bring, as this would necessitate the defining of additional medium-term recovery measures. Future policies have to focus on structural reforms. At the same time, the banking sector should pay special attention to monitoring the level of non-performing loans and take measures to maintain them at a level not posing a financial stability risk.

It was agreed to continue the dialogue and cooperation between the two institutions, to provide adequate responses to the challenges posed by the new situation, as well as to better prepare Montenegro as part of the process of EU accession.