As of August 31, the debt of citizens in Montenegro has reached €2.24 billion, according to data from the Central Bank of Montenegro (CBCG). A significant portion of this debt—43%—consists of cash loans, while housing and renovation loans account for 33% of total personal loans.
Commercial banks have reported an increased interest from citizens in both new loans and refinancing existing loans for larger amounts. Economic analysts warn that this trend could pose long-term challenges.
Jelena Obradović from the CBCG noted that the data indicates a continuous rise in citizens’ debt over the past three years. In August 2021, the debt was €1.52 billion, rising to €1.526 billion the following year and increasing by another €34 million in 2023 to reach a record €2.24 billion. In August alone, citizens took on an additional €20 million in debt.
The increased lending activity by commercial banks can be attributed, according to Batrić Janjić from Hipotekarna Bank and Slobodan Ćalasan from Erste Bank, to rising salaries and pensions, which have driven demand for larger loans.
Economic analyst Mirza Mulešković explains that this situation is expected, as higher incomes allow for greater borrowing. However, this increase is driven more by administrative measures rather than productivity and economic growth, resulting in higher prices and a greater need for money.
In March, the Central Bank initiated a move to lower interest rates. Some banks contributed more than others based on their lending capacity and market share. Following the rise of the EURIBOR reference interest rate in June 2022, which led to increased monthly payments, the Central Bank coordinated with commercial banks to offer clients programs aimed at easing the transition from variable to fixed interest rates.
Mulešković warns that, in the long run, this situation could threaten financial stability for citizens. Without increased economic productivity, the trend of rising debt is likely to continue.
“We need to diversify the economy so that public sector jobs are not the most attractive. Ultimately, the real economy should be the backbone of development, as it funds everything the state does,” Mulešković asserts.
