The Central Bank of Montenegro has released its latest macro-financial assessment, revealing that the country’s economy experienced a real GDP growth of 3.2% in the first half of 2025. This growth is attributed to increased activity in key service sectors and sustained investment inflows, which have helped the economy recover despite external challenges and pressures on household consumption.
Overall financial stability has been maintained, with the banking sector showing resilience. The assessment indicates that banks are solvent, liquid, and profitable, bolstered by steady deposit growth and an increase in lending to both households and corporations. Furthermore, asset quality indicators have improved, evidenced by a decline in non-performing loans.
However, the Central Bank has highlighted growing systemic risks associated with rapid credit expansion and surging real estate prices. Notably, there has been double-digit growth in housing and cash loans to households, coupled with property prices reaching unprecedented levels, particularly in new residential developments. This situation raises concerns about potential corrections in the real estate market and increased sensitivity to changes in financing conditions.
In response to these emerging risks, the Central Bank has adopted a more stringent macroprudential approach. The countercyclical capital buffer was raised to 1% during 2024 and early 2025 in two increments. This measure aims to enhance banks’ capacity to absorb potential shocks related to credit cycles and real estate dynamics while ensuring continued support for economic activity.
The Central Bank also identified external risks that could impact growth and financial stability. These include potential shocks from global demand fluctuations and shifts in international trade and financing conditions, which may influence export channels, capital flows, and borrowing costs.
Despite these challenges, core indicators within the banking sector remain strong. Profitability has improved with an increase in net income and enhanced returns on equity and assets. Regulatory oversight continues to focus on balancing economic growth support with the need to mitigate excessive financial risk accumulation, underscoring the importance of maintaining this equilibrium as credit and property markets expand.
