Real GDP shrinks 0.7% y/y in September 2020
Georgia’s economic activity significantly improved, with GDP contracting by just 0.7% y/y in September 2020 after falling 5.3% y/y in August 2020 and 12.3% y/y in 2Q20, according to Geostat’s rapid estimates. In September, real growth was positive in manufacturing, mining, trade, financial and insurance activities, and was down in other sectors. Overall, real GDP contracted by 5.0% y/y in 9M20. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.
NBG kept its policy rate unchanged at 8.0%
At its meeting on 28 October 2020, NBG’s monetary policy committee decided to keep its policy rate unchanged at 8.0%. Annual inflation continued to decline, reaching 3.8% in September. According to the NBG’s current forecast, annual inflation will have a declining trend and remain close to the 3.0% target in 2021, reflecting weak aggregate demand. The NBG also took into account the uncertainty associated with the acceleration of the virus spread and the increase in geopolitical risks. According to the NBG’s current estimates, the gradual exit from the tight monetary policy stance and its pace will depend on inflation expectations and the dynamics of economic activity. The next committee meeting is scheduled for 8 December 2020.
NPLs at 2.3% in September 2020
In September 2020, the banking sector loan portfolio increased by 11.9% y/y and 1.7% m/m (exc. FX effect). In unadjusted terms, loan portfolio was up 20.8% y/y and 5.5% m/m amounting to GEL 36.4bn (US$ 11.1bn). By currency, the GEL-denominated loans went up to GEL 15.5bn (+14.8% y/y), while foreign currency loans reached GEL 20.9bn (+9.6% y/y, exc. FX effect). By sector, corporate lending growth accelerated m/m (+1.8%), after decreasing 1.4% in previous month (exc. FX effect), and retail loans also accelerated by 1.6% m/m, after 1.1% y/y growth in August, mostly reflecting mortgage growth. In September 2020, loan dollarization stood at 56.9% (+2.26ppts y/y and +0.81ppts m/m) and NPLs stood at 2.3% (-0.32ppts y/y and +0.12ppts m/m).
Bank deposits were up 19.5% y/y and 1.8% m/m (exc. FX effect) to GEL 32.8bn (US$ 10.0bn) in September 2020. The GEL-denominated deposits reached GEL 12.6bn (+35.7% y/y), while foreign currency deposits went up to GEL 20.2bn equivalent (+10.3% y/y, exc. FX effect). As a result, deposit dollarization reached 61.6% (-2.28ppts y/y and +2.08ppts m/m) in September.
NBG sold US$ 80mn
On 27 and 29 October 2020, the NBG intervened on the FX market and sold total of US$ 80mn to limit GEL volatility. The NBG’s total sales amounted to US$ 649.7mn through FX auctions during March-October, 2020.
