NPLs at 3.5% in June 2017
In June 2017, the banking sector loan portfolio increased 13.4% y/y after growing 14.3% y/y in previous month, excluding the exchange rate effect. In unadjusted terms, loan portfolio was up 17.9% y/y and 1.2% m/m to GEL 19.3bn (US$ 8.0bn). Deposits were up 15.5% y/y excluding the exchange rate effect. In unadjusted terms, deposits were up 17.4% y/y and up 2.8% m/m to GEL 16.8bn (US$ 7.0bn). Deposit dollarization reached 67.5% (+0.3ppts y/y and -1.0ppts m/m). NPLs stood at 3.5% in June 2017(-0.2% y/y and m/m).
NBG keeps its policy rate unchanged at 7.0%
At its meeting on 26 July 2017, NBG’s monetary policy committee decided to keep the policy rate unchanged at 7.0%. NBG cited that increase in inflation is in line with existing forecast in 2Q17 due to one-off supply side pressures and the inflation will remain above the target rate of 4.0% throughout 2017. The annual inflation rate rose to 7.1% in June 2017; Notably, the excise tax hikes on tobacco and fuels accounted for 2.6ppts in price level growth.
NBG also noted that there is no need for further tightening of monetary policy as the increase in inflation rate is temporary; as one-off factors affecting prices dissipate, inflation will decrease in 2H17 and get close to its target rate at the beginning of 2018. Given the absence of additional shocks in the medium term, the policy rate is expected to decrease to its neutral level based on NBG. The next committee meeting is scheduled for 6 September 2017.
