NBG increases its policy rate by 25 basis points to 6.75%
At its meeting on 25 January 2017, NBG’s monetary policy committee increased the policy rate by 25 basis points to 6.75% and announced to gradually increase the key rate to 7% in the course of the next two quarters. As NBG cited, decision was based on increased inflation expectations. Annual inflation was 1.8% in December 2016 but NBG expects further rise in prices due to one-off factors – increase in excise taxes and exchange rate fluctuations. NBG cited that the inflation rate expected to be above target of 4.0% in 2017, despite weak demand. NBG expects the inflation rate to decrease in 2018 and remain below the 3.0% target. The next committee meeting is scheduled for March 7, 2017.
NPLs at 3.4% y/y in December 2016
In December 2016, the banking sector loan portfolio increased 10.7% y/y after growing 9.5% y/y in previous month, excluding the exchange rate effect. In unadjusted terms, loan portfolio was up 18.1% y/y and 6.0% m/m to GEL 18.9bn (US$ 7.1bn). Deposits were up 10.2% y/y excluding the exchange rate effect. In unadjusted terms, deposits were up 18.4% y/y and up 5.2% m/m to GEL 17.0bn (US$ 6.4bn). Deposit dollarization reached 71.4% (+1.9ppts y/y and +0.2ppts m/m). NPLs stood at 3.4% in December 2016, up 0.7ppts y/y and down 0.6ppts m/m.
