01 January 2019 - Further movements of interest rates on loans will mostly depend on effects of the normalization of monetary policy in the EU. If interest rates remain unchanged, as the monetary authorities in the EU are announcing, I expect that they will remain at the same level in Montenegro too, said the Governor of the Central Bank of Montenegro, Radoje Žugić.
He said that interest rates could go up if the European Central bank drastically changed the course of its policy and increased reference rates. However, trends at the European market do not indicate drastic changes in the policy in 2019, and, therefore, the CB does not expect an impact on domestic money price.
“A strong trend of reduction in interest rates in Montenegro has been obvious for quite some time. Although they are recording historically minimum levels, interest rates are still very high, that is, they do not contribute to minimizing the weaknesses of the real sector – non-liquidity and insufficient competitiveness,” said Žugić.
According to him, interest rates on savings are at an extremely low level.
Žugić pointed out that the Central Bank had prepared and delivered to the Government recommendations for the economic policy for 2019.
“By analyzing the overall macroeconomic situation, we have identified the domains where it is necessary to undertake specific measures, to increase competitiveness and improve the business environment and thus open the growth potentials necessary for more intense economic growth and reduction of risks involved. The Budget plan for the next year was projected on real bases and by the recommendations of the Central Bank. The key factor of maintaining fiscal sustainability is the consistent implementation of the measures of fiscal consolidation,” said Žugić.
After analyzing business environment, it has been stated that improvement of competitiveness is one of the key components for conducting appropriate economic policy.
“In that context, we made a recommendation that should entail changes rates of contribution on the salaries. We have also suggested considering the possibility of increasing minimum wage, as well as continuous work on suppressing grey economy to create an effective measure for increasing competitiveness and reducing the informal economy. According to the assessment of the potential negative impact on fiscal indicators, the Government’s opinion is that there is no space for an increase of minimum wage next year. However, it is necessary to consider this implementation,” says Žugić.
Asked whether the request of the opposition regarding the reduction of excise on fuel due to high growth rates is founded, Žugić says that chances for that are slim, due to the process of the rehabilitation of debt and deficit.
He also said that the temporary management in Atlas and IBM was introduced with the aim of considering possibilities for the continuation of their business.
“If the reports show that their business is sustainable, recapitalization will be called. The existing owners will have the advantage. In case of a negative report, the outcome would be taking away the work permit and instigation of bankruptcy proceedings,” said the Governor of the Central Bank of Montenegro.
