CorD Recommends


Montenegro Earns €17 Million from Toll Roads in Two Years

Montenegro has generated €17 million in toll...

Jakob Granit, Director General of the Swedish International Development Cooperation Agency (SIDA)

Only Inclusive Societies can Grow Sustainably

Inclusiveness, equity, gender balance and respect for...

H.E. Luca Gori, Ambassador of Italy

More Italy in Serbia

Serbia is now among the few non-EU...

Patrizio Dei Tos, President of Confindustria Serbia

Bilateral Trade on the Rise Again

Confindustria Serbia has established itself as a...


German Voters Dominate, Malta Least Represented in Upcoming European Parliament Elections

As the 2024 European Parliament elections draw near, set to take place from 6 to 9 June, Eurostat has...

Regional Creative Network Established in Belgrade

In an initiative led by the National Platform "Serbia Creates" and the Ložionica Center, the first gathering of creative...

Chile to Install World’s Largest Astronomy Camera 

Chile is set to install the world's largest astronomy camera atop Cerro Pachón in the Coquimbo region, on the...

Montenegro Earns €17 Million from Toll Roads in Two Years

Montenegro has generated €17 million in toll revenue from the Bar-Boljare-Smokovac-Mateševo motorway in two years Since the opening of the...

John Lennon’s Acoustic Guitar Sells for Over $2.8 Million

An acoustic guitar once played by John Lennon at the height of The Beatles' fame has sold at auction...

Radoje Žugić, Governor Of The Central Bank Of Montenegro

Every Crisis Accentuates Risks

The negative impact of the war and pandemic will influence the overall macroeconomic situation, growing inflation and the sustainability of the country’s public debt

The war in Ukraine can’t bring anyone anything good and will have a negative impact on many sectors, but also on employment levels, inflation and citizens’ standard of living in Montenegro – says Central Bank of Montenegro Governor Radoje Žugić. In this context, the risks confronting the country are accentuated. However, the Montenegrin banking sector has performed excellently to date, with a low percentage of non-performing loans.

How do you see the possible effects of the reform envisaged by the “Europe Now” programme from today’s perspective, when war in Ukraine has led to us entering a new phase of global market instability?

– The Central Bank welcomed some of this programme’s goals, first and foremost reducing the wage burden and improving economic standards, particularly for the poorest segments of the population.

However, prior to the implementing of this programme, we highlighted certain risks associated with it, especially those that could threaten fiscal stability. Given the fact that the parliament has adopted measures to reduce revenue and increase expenditure, but hasn’t adopted the measures to increase revenue that were proposed initially, the Central Bank of Montenegro shares the IMF’s opinion that this programme should be implemented gradually, in carefully determined phases, with the aim of eliminating the risk of the rise of unemployment and the informal economy that would lead to increased inflationary pressures and failure to achieve planned revenues.

How can this situation, which sees us facing energy price disruption, inflation, the collapse of production chains and uncertainty linked to the upcoming tourist season, reflect on budget revenues and economic growth in Montenegro?

– Any growth during this year will certainly be exposed to rising inflationary pressures, which will have a negative impact on consumer spending. Montenegro has been hit by inflationary pressures following higher energy prices and food costs, as well as the country’s high dependence on imports. Poor results for the tourism sector could materialise as a direct consequence of the war, due to expected reductions in the number of tourists arriving from Russia and Ukraine, who accounted for almost a quarter of all overnight stays of foreign tourists in Montenegro. The decline in this sector, In the case that no replacement tourists from other countries can be found, this sector’s decline will lead to a reduction in budget revenues and additional reductions in consumer spending. However, with the waning of the pandemic we can expect the revitalising of the Western tourist market, which could compensate for the decline from the Russian and Ukrainian markets to some extent.

When it comes to budget revenues, it is clear that falling economic activity, as well as all other difficulties mentioned, lead to a worsening of the existing budget imbalance, although paradoxically, inflation in the first quarter “favoured” the growth of budget revenues.

Expectations for this year suggested economic growth exceeding six per cent, but at the Central Bank we now have several different scenarios showing that the growth rate could range between 3.2% and 4.6%, depending on exposure to geopolitical and other risks

How will this situation impact on the continued financing of major infrastructure projects?

– A high level of uncertainty, as a result of the Russian-Ukrainian war and disturbances to international trade, can generally weaken investor confidence and thus create an investment slowdown. With the economic reform program for the 2022-2024 period, planned investments in transport and energy infrastructure projects are worth approximately 172 million euros for the current year, with plans for 75% of that amount to be financed from public sources and 25% from private funds. It is obvious this isn’t an excessively high level of investment, as was the case during the years of the intensive construction of highways, and as such I think that, despite all the challenges, this goal isn’t unattainable, or at least not for the most part.

According to the Economic Reform Programme, a new large investment cycle is expected to be launched in the 2023-2024 period, with plans including, among other things, construction of the second section of the Bar-Boljare Highway. Numerous factors will determine whether these planned investments will be realised, and under which dynamics.

What would you recommend to the Government when it comes to conducting economic policy in 2022?

– Considering that compiling economic policy recommendations for the Government is not an obligation of the Central Bank, but rather a possibility envisaged by the law, late last year we prepared this document in a slightly different form, in the form of analysis of the most important macroeconomic risks.

This document identifies the risks confronting Montenegro. It has been recommended that the government carefully monitor the risks identified and take preventative measures to avoid or minimise their possible consequences.

The risks that were analysed in this study are divided into short-term and long-term macroeconomic risks, risks stemming from the banking system, fiscal risks, inflationary risks, external risks and others. I consider the key challenges as being those linked to the fiscal sphere, and particularly further fluctuations in public debt. The high deficit at year’s end 2020 brought with it a need for additional borrowing, which – coupled with significant GDP declines – caused gross public debt to increase to 4.4 billion euros or 105.3% of GDP, while gross government debt totalled 103.5% of GDP.

Estimated GDP growth in 2021 resulted in reducing the share of public debt in GDP. As such, Montenegro’s gross public debt at year’s end 2021 amounted to 4.2 billion euros or 84.7% of GDP, while gross government debt totalled 83.3% of GDP.

What’s the situation like in the Montenegrin banking sector and under which circumstances could it maintain such a level?

– The banking sector is stable, highly liquid and adequately capitalised. In February 2022, all key balance sheet items had recorded growth compared to the same period of last year. The banking system is characterised by its high liquidity. Specifically, liquid assets are at a high level and totalled 1,450 million euros at the end of February 2022, which is up 34.6% on the same month of 2021. Banks’ deposit potential is also at a high level, with total deposits at the end of February amounting to 4,292.2 million euros, and growth of 25.6% in the comparative one-year period. The trend of falling interest rates on both lending and deposits continued.

The Central Bank uses all available supervisory tools to pay special attention to the quality of banks’ assets. Nonperforming loans represented 6.69% of all loans at the end of February and have been recording monthly declines of 0.18 percentage points. NPLs were up 0.99 percentage points at the annual level. The aggregate solvency ratio at year’s end 2021 stood at 18.5%, significantly higher than the stipulated minimum (10%).

The preserved stability of the system, positive trends and strengthened supervisory activity contribute to our expectation that the banking system will continue to withstand potential shocks and maintain a good performance

The Central Bank of Montenegro conducts daily monitoring of deposits at the level of individual banks and the system as a whole, with an emphasis on deposits made by non-residents from Ukraine and the Russian Federation since the outbreak of the war in Ukraine. Data provided by banks on a daily basis show that total deposits at the level of the system have grown since the war began.

Excluding escrow accounts, total deposits of non-residents from the Russian Federation represent just 2.7% of total deposits at the level of the system, making it clear that even the complete withdrawal of these clients’ deposits couldn’t jeopardise liquidity at the level of the system.

How is inflation reflecting on Montenegro’s banking market? What are your expectations when it comes to the costs and dynamics of approving both corporate and retail loans?

– No negative inflationary impact on the Montenegrin banking market has been recorded for now. Specifically, all risk indicators are moderate, with interest rates having recorded slight falls during 2021 and 2022, while lending activity remains positive. Although banks are cautious when it comes to lending, they are providing support to clients. This led to total loans having grown annually by approximately 220 million euros by February 2022, or loans having increased by 6.9% compared to February 2021, with corporate loans growing by 5.7% and retail loans by 3.7%.

How far have banks in Montenegro progressed on digitalisation and the use of artificial intelligence?

– The majority of banks operating on our market are focused on the automating of their internal processes, recognising the various benefits brought by digital transformation, both for the organisation itself and for customers.

Apart from the automating of internal processes, banks are investing the most in, and relying mostly on, payment innovations (digital wallets, QR codes) and chatbot and big data analytics, while there is still no use of artificial intelligence on our market.

When could we expect Montenegro to harmonise its regulations with the standards of SEPA (Single Euro Payments Area)?

– The Central Bank of Montenegro has harmonised key regulatory requirements that measure Montenegro’s preparedness to join SEPA.

It was back in March 2020 that the Central Bank Council adopted the working version of the draft law on amendments to the Law on Payment Operations, which fully incorporates Directive (EU) 2015/2366 on payment services in the internal market, the so-called PSD2 directive. The Government of Montenegro submitted its Proposed Law on Amendments to the Law on Payment Operations to the Parliament of Montenegro for adoption in December 2021. With the adoption of this law, Montenegro’s regulatory framework governing payment transactions will be fully harmonised with the Acquis communautaire in this area.

With the aim of aligning the country with secondary sources of European Union law in the field of payment transactions, the CBCG prepared – and the Parliament of Montenegro passed in December 2021 – the Law on Comparability of Fees Related to Consumer Payment Accounts, Payment Accounts Switching and Payment Accounts With Basic Features and the Law on Interchange Fees and Separate Business Rules Concerning Payment Cards, both of which are fully aligned with the relevant EU directives.

In order to ensure the full harmonisation of Montenegro’s regulatory framework with the requirements of SEPA, three more regulations need to be transposed. The CBCG has requested technical assistance from the central banks of EU member states in transposing these regulations, with the aim of adopting them by the end of 2022.

The CBCG has proposed, and strongly supports, the concept of networking through the European Central Bank’s Instant Payment System (TIPS). This project is planned for completion in 2024.


The Russian-Ukrainian war could impact negatively on the influx of tourists and investments, considering that Russia was the largest foreign investor in Montenegro during the previous year


Although public debt has a declining trend in terms of percentages, its high level in absolute terms is a concern. This is thus the most significant, highest-ranking systemic risk


The banking sector is stable, highly liquid and adequately capitalised. No negative impact of inflation on Montenegro’s banking market has been recorded to date