Montenegro has recovered from the recession, banks are the healthiest segment of the economy

In the middle of 2022, the Montenegrin economy has fully recovered from the recession caused by the coronavirus pandemic, and banks are the healthiest segment of the economic and financial system of Montenegro, as indicated by their high capitalization, liquidity and high positive operating results, according to the report of the Central Bank of Montenegro (CBCG).
As stated in the report, key indicators show that the risks are still present, i.e. that the financial position of non-financial institutions and the population, the two main groups of clients to which banks are exposed, is still under the influence of uncertainty, especially in the context of geopolitical tensions and the coronavirus pandemic .
At the end of 2022, cash loans to natural persons amounted to EUR 552.7 million, or 4.3% less compared to EUR 577.6 million at the end of 2021.
Their amount at the end of 2019 was EUR 707.3 million. Also, their participation in total loans to natural persons further decreased during 2022 from 39.8% to 34.9%.
– Pressures in state finances continue to represent a systemic risk in Montenegro. Indirectly, the level of public debt in the case of Montenegro points to the continuation of relatively weak international competitiveness, high consumption versus low accumulation and dependence on the inflow of foreign capital. In the context of the situation in Ukraine, the coronavirus pandemic and the tightening of financing conditions on the international market, a decisive continuation of the measures of a responsible and well-balanced fiscal policy, aimed at solving structural economic problems, with the aim of bringing Montenegro to a relatively safe zone, is necessary – the CBCG report says.
In Montenegro, as stated by the Central Bank of Montenegro, there is additional complexity in terms of the fiscal situation and state lending due to the limited credit potential of banks and the possible effect of squeezing out funds from economic flows by the state.
– During 2022, the banking sector’s exposure to the state increased by EUR 102.2 million to EUR 899.9 million, i.e. 14% of bank assets – the CBCG report says.
Banks, as they state, have a perception of increased credit risk in the real sector, which is best indicated by relatively prudent credit activity, high level of interest rates on loans, as well as other credit conditions.
– Certainly, for now, the banking sector has successfully responded to the challenge of low-quality loans from the pandemic period, thanks to significant and high-quality “layers” of liquid assets, i.e. capital – the report concluded.

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