Real GDP shrinks 2.7% y/y in March 2020
Georgia’s economy contracted by 2.7% y/y in March 2020 after growing 2.2% y/y in previous month, according to Geostat’s rapid estimates. Real growth was recorded only in construction and information & communications sectors. Meanwhile, real growth was down in all other sectors, reflecting pandemic effects on the economy. Overall, real GDP growth was 1.5% y/y in 1Q20. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.
NPLs at 2.2% in March 2020
In March 2020, the banking sector loan portfolio increased 17.1% y/y after growing 18.1% y/y in previous month, excluding the exchange rate effect. In unadjusted terms, loan portfolio was up 30.7% y/y and up 10.6% m/m to GEL 35.0bn (US$ 10.7bn). Deposits were up 10.1% y/y excluding the exchange rate effect. In unadjusted terms, deposits were up 24.8% y/y and up 8.9% m/m to GEL 28.9bn (US$ 8.8bn). Loan dollarization stood at 58.5% (+2.57ppts y/y and +4.23 m/m) and deposit dollarization was 66.3% (+4.26ppts y/y and +4.59ppts m/m). NPLs stood at 2.2% in March 2020 (-0.79ppts y/y and flat m/m).
NBG sold US$ 20.0mn
On 27 April 2020, the NBG intervened on the FX market and sold US$ 20.0mn to limit GEL volatility. This was fourth FX intervention in 2020 for a total of US$ 120.0mn sale.
NBG cuts its policy rate by 0.5ppts to 8.5%
At its meeting on 29 April 2020, NBG’s monetary policy committee decided to reduce its policy rate by 50bps to 8.5%. According to NBG, supply factors caused by logistical constraints will delay the reduction of inflation in the coming months, however a sharp decline in external and domestic demand due to the Covid-19 pandemic will put a downward pressure on inflation throughout the year. Therefore, NBG started to exit the tight monetary policy stance gradually and further steps will depend on how quickly inflation expectations recede. According to NBG’s forecast, due to temporary factors, inflation will remain high for several months, then gradually decline, and approach the target level in 1H21. The next committee meeting is scheduled for 24 June 2020.
