INTERVIEW
Every Crisis
ACCENTUATES RISKS RADOJE ŽUGIĆ GOVERNOR OF THE CENTRAL BANK OF MONTENEGRO
The negative impact of the war and pandemic will influence the overall macroeconomic situation, growing inflation and the sustainability of the country’s public debt
T
he war in Ukraine can’t bring anyone anything good and will have a negative impact on many sectors, but also on employment levels, inflation and citizens’ standard of living in Montenegro - says Central Bank of Montenegro Governor Radoje Žugić. In this context, the risks confronting the country are accentuated. However, the Montenegrin banking sector has performed excellently to date, with a low percentage of non-performing loans.
■ How do you see the possible effects of the reform envisaged by the “Europe Now” programme from today’s perspective, when war in Ukraine has led to us entering a new phase of global market instability? - The Central Bank welcomed some of this programme's goals, first and foremost 12 | MONTENEGRO BUSINESS SECTOR 2022
reducing the wage burden and improving economic standards, particularly for the poorest segments of the population. However, prior to the implementing of this programme, we highlighted certain risks associated with it, especially those that could threaten fiscal stability. Given the fact that the parliament has adopted measures to reduce revenue and increase expenditure, but hasn't adopted the measures to increase revenue that were proposed initially, the Central Bank of Montenegro shares the IMF's opinion that this programme should be implemented gradually, in carefully determined phases, with the aim of eliminating the risk of the rise of unemployment and the informal economy that would lead to increased inflationary pressures and failure to achieve planned revenues.
■ How can this situation, which sees us facing energy price disruption, inflation, the collapse of production chains and uncertainty linked to the upcoming tourist season, reflect on budget revenues and economic growth in Montenegro?
- Any growth during this year will certainly be exposed to rising inflationary pressures, which will have a negative impact on consumer spending. Montenegro has been hit by inflationary pressures following higher energy prices and food costs, as well as the country's high dependence on imports. Poor results for the tourism sector could materialise as a direct consequence of the war, due to expected reductions in the number of tourists arriving from Russia and Ukraine, who accounted for almost a quarter of all overnight stays of foreign tourists in
