The Central Bank of Montenegro has published its latest macro-financial assessment showing that Montenegro’s economy recorded real GDP growth of 3.2% in the first half of 2025, while overall financial stability was preserved and the banking sector remained stable. At the same time, the central bank flags rising systemic risks linked to rapid credit expansion and elevated real-estate prices.
According to the assessment, the growth outcome reflects stronger activity across key service sectors and sustained investment inflows, supporting the ongoing recovery despite a challenging external environment and pressures on household consumption. The Central Bank notes that domestic economic momentum has held up even as global conditions remain volatile.
The banking system continued to operate with solid fundamentals over the period. Banks remained solvent, liquid, and profitable, supported by steady deposit growth and expanding lending to households and corporates. Asset quality indicators improved further, with the share of non-performing loans declining, reinforcing perceptions of resilience across the sector.
However, the Central Bank underscores that cyclical risks have intensified. The most pronounced vulnerabilities stem from strong credit growth—particularly in housing and cash loans to households, which are posting double-digit expansion—and from property prices reaching new historical highs, especially in new residential developments. This combination increases exposure to a potential correction in the real-estate market and heightens sensitivity to changes in financing conditions.
In response, the regulator has strengthened its macroprudential stance. During 2024 and into early 2025, the countercyclical capital buffer was increased in two steps to 1%, enhancing banks’ capacity to absorb potential shocks associated with the credit cycle and real-estate dynamics. The measure forms part of a broader policy framework aimed at preventing the build-up of systemic risk while maintaining the banking system’s ability to support economic activity.
Beyond domestic cyclical factors, the Central Bank also points to external risks, including possible shocks transmitted through global demand and changes in international trade and financing conditions. These could affect growth and financial stability through export channels, capital flows, and borrowing costs.
Despite these challenges, the banking sector’s core indicators remain robust. Profitability improved, with higher net income and stronger returns on equity and assets, while regulatory oversight continues to focus on balancing support for economic growth with the containment of excessive financial risk accumulation. The Central Bank’s assessment emphasizes maintaining this balance as credit and property markets continue to expand.
