Public debt is the main fiscal risk, and the announced fiscal reforms within the "Europe Now" program bring with them potential uncertainty, announced the Central Bank, whose Council and Advisory Board today adopted the Report on the Results of Macroeconomic Risk Analysis.
The announcement stated that the members of the Council and Advisory Board of the CBCG welcomed the idea of reforms brought by the "Europe Now" project and evaluated the announced improvement in the economic position of citizens, especially the poorest categories, as positive.
"Also, the announced reduction in the wage burden, which is currently extremely high, brings benefits to the economy, providing space for the treatment of its key vulnerabilities - insufficient competitiveness and weakened liquidity, was evaluated at today's session. However, according to the opinion of the members of the Council and the Advisory Board of the CBCG, the implementation of such large-scale reforms should be preceded by a detailed and multi-layered analysis, which would consider possible sources of financing and accurately quantify the impact of the proposed measures," the announcement states.
In the aforementioned analysis, the macroeconomic risks facing Montenegro were identified and considered, and which should be taken into account when making economic decisions. Therefore, the adopted report will be sent to the Government, whose competence is the creation and management of economic policies, stated the CBCG.
The Governor of the CBCG, Radoje Žugić, presented to the members of the Council and the Advisory Board the basic findings of the aforementioned analysis, stressing that the identification of risks does not mean that they will materialize, but the intention is to draw attention to them in order to plan and undertake preventive measures in a timely manner to minimize their potential negative impact. He also pointed out that the list of risks is not final, as new risks are continuously emerging.
The risks analyzed in the study are divided into: short-term and long-term macroeconomic risks, risks from the banking system, fiscal risks, inflation risk and external risks.
"Continued growth in energy prices and their limited availability on world markets and low competitiveness of the real sector are recognized as the main short-term macroeconomic risks. As long-term macroeconomic risks, the following are highlighted: low degree of diversification of the domestic economy, negative demographic trends, uneven regional development, climate change, and challenges in the field of official statistics," the CBCG added.
In the banking sector, a risk has been recognized in the form of potential NPL growth, which can be expected when the CBCG support measures are withdrawn or expire, and in conditions where unemployment is high, while a part of the economy is still facing the consequences of the corona crisis. Other risks recognized in the banking sector relate to excessive credit growth, banks' exposure to the state and the growth of variable interest rates.
It was concluded that the pandemic had a strong negative impact on the Montenegrin economy, among other things, due to its high dependence on the service sector, and that therefore the development model should be changed, focusing on sectors in which we have comparative advantages, as well as on the application of digitization and the green economy. which today is one of the key instruments for achieving sustainable development. The current pandemic has also indicated the chances for the future development of Montenegro and the region, in terms of the dislocation of certain production processes from the countries of the Far East to the Western Balkans, which would contribute to the shortening of supply chains, whose current length and complexity have proven to be a major problem and the cause of destabilization of world markets, the CBCG points out.
It was assessed that the prepared material is of exceptional quality, and that it can represent a useful basis for creating and conducting a consistent and sustainable economic policy.
The advisory board represents the advisory body of the CBCG, and its members are distinguished professors and former governors from the region, as well as former members of the CBCG Council.
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