Current account deficit more than halved in 2Q19
Georgia’s current account deficit more than halved in USD terms reaching 3.2% of GDP in 2Q19 down from 8.2% of GDP in 2Q18, according to NBG. Reduction in merchandize trade deficit, down 13.7% y/y to US$ 879.7mn, was the major reason behind improved CA, as exports increased 7.7% y/y, while imports were down 2.4% y/y. Positive balance in services was up 2.9% y/y to US$ 577.8mn (14.4% of GDP), mostly driven by increased tourism inflows (up 8.4% y/y to US$ 877.6mn). Surplus in current transfers, second largest positive category, amounted to US$ 333.9mn (8.3% of GDP, down 5.6% y/y). Meanwhile, negative income balance decreased 32.5% y/y to US$ 159.6mn (4.0% of GDP). Net FDI (3.2% of GDP) and portfolio investments (14.2% of GDP) were major funding categories of the CA deficit, while international reserves increased by US$ 241mn. Overall, in 1H19, CA deficit stood at record low 4.6% of GDP.
NBG increases its policy rate by 50bps to 7.5%
At the extraordinary meeting held on 25 September 2019, NBG’s monetary policy committee increased the policy rate by 50bps to 7.5%, after increasing the rate by 50bps earlier on 4 September. NBG noted that the recent tightening of monetary policy was aimed to reduce inflationary pressures stemming from GEL’s exchange rate depreciation. NBG reiterated its commitment to price stability and expressed readiness to use all available instruments at its disposal, if necessary, to curb inflationary pressures. Next monetary committee meeting will take place on 23 October 2019.
NPLs at 2.8% in August 2019
In August 2019, the banking sector loan portfolio increased 14.6% y/y after growing 14.8% y/y in previous month, excluding the exchange rate effect. In unadjusted terms, loan portfolio was up 22.0% y/y and up 0.7% m/m to GEL 29.6bn (US$ 10.0bn). Deposits were up 8.1% y/y excluding the exchange rate effect. In unadjusted terms, deposits were up 17.5% y/y and up 1.4% m/m to GEL 25.3bn (US$ 8.6bn). Loan dollarization stood at 55.5% (flat y/y and -0.81ppts m/m) and deposit dollarization reached 63.7% (+0.99ppts y/y and +0.29ppts m/m). NPLs stood at 2.8% in August 2019 (+0.14ppts y/y and -0.14ppts m/m).
NBG sold US$ 40.0mn
On September 27, 2019, the NBG intervened on the FX market and sold US$ 40.0mn. Overall, during January-September 2019, the NBG purchased US$ 216mn and sold US$ 72.8mn on its 13 FX auctions.
