The Council adopted the Governor’s Report on the operations and implementation of the policy of the Central Bank of Montenegro for August and September 2015, which states that the activities of the Central Bank in this period were implemented in accordance with obligations established by its plan for 2015.
The statement said that the Council analyzed and rated the impact of potential risks to financial stability, but concluded that the financial system is stable, and the level of systemic risk moderate.
“The Council adopted the Recommendations to the Government of Montenegro for Economic Policy in 2016. It noted that expected rate of real GDP growth is up to four percent this year. This is growth higher than projected, which is largely due to the stronger growth of tourism and related activities this year. Other sectors recorded an increase in activities also, explained partly by the real increase and partly by the low last year’s base. The favorable weather conditions, as well as favorable external circumstances in 2015, led to a significant growth in tourism, but raised the issue of drought and the vulnerabilities that it can cause in the field of agriculture and the energy sector in the coming period”, the statement said.
It is expected that the budget deficit would be high, due to a significant increase in expenditure for the construction of the highway.
“However, a mitigating factor is that the structural budget deficit is low. The deficit of the current account deficit for the first six months of this year was higher than in the same period last year and is an indicator, in part, of the recovery of economic activity – but also of low competitiveness of export products and services. Although the public debt reached the level of 60 percent, the expectation is that its development component will create new value in the future”, the statement said.
The Council stated Montenegrin economy is on an upward trajectory of growth, but will face risks in the future.
“This is primarily related to the preservation of fiscal stability, a high degree of illiquidity in the real sector, low level of competitiveness, a high share of non-performing loans and, consequently, high interest rates, non-diversification of exports, high current account deficit of the balance of payments, and such”, the statement added.
Council believes the focus of economic policy in 2016 should be on fiscal policy, meaning cautious public spending, which should be at the level of the current revenues of the budget.
“While in 2016, due to construction of the highway, budget deficit will be high, structural deficit should not be higher than one percent. This would preserve financial stability and prevent going into the zone of increased risk of public finances. Also, priority should be placed on structural reforms that will promote growth and development, economic competitiveness and create stability”, the Council said.
