Real GDP up 3.4% y/y in March 2016
Georgia’s real GDP grew 3.4% y/y in March 2016, after 2.6% and 0.8% y/y growth in February and January respectively, according to GeoStat’s rapid estimates. In 1Q16, output growth averaged 2.3% y/y (growth was 3.3% y/y in 1Q15). Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.

NPLs at 3.2% in March 2016
In March 2016, the loan portfolio grew 5.2% y/y, excluding the exchange rate effect (+9.4% y/y and -1.6% m/m in unadjusted terms), to GEL 15.9bn (US$ 6.7bn). Deposits grew 9.0% y/y, excluding the exchange rate effect (+13.6% y/y and -2.4% m/m in unadjusted terms), reaching GEL 14.3bn (US$ 6.0bn). On a monthly basis, deposits and loans growth was down due to GEL appreciation, lowering FX-denominated loans and deposits nominal value in GEL terms. Deposit dollarization was down by 1ppts m/m to 70.8% in March. NPLs remain under control at 3.2% in March 2016, down 0.1ppts y/y and m/m.

NBG cuts its policy rate to 7.5%
At its meeting on April 27, 2016, NBG’s monetary policy committee cut its policy rate by 50 basis points to 7.5%, citing that there is a need to ease monetary policy gradually and reduce key rate to neutral level of 5-6% in the medium-term. NBG started monetary tightening from February 2015 with the policy rate raised from 4.0% to 8.0% during 2015 and keeping unchanged at 8.0% in 1Q16. NBG’s monetary policy committee cited that tightening of monetary policy in 2015 contributed to lower inflation expectations and annual inflation is expected to remain below central bank’s target level of 5.0% in coming months, reaching the target level by the end of the year. Annual inflation rate retreated to 4.1% in March from 5.6% in February 2016. At the same time, on April 27, in an attempt to boost funds attracted in national currency, the monetary policy committee decided to decrease commercial banks’ minimum reserve requirements for local currency from 10 to 7%. But committee increased minimum reserve requirements for the funds attracted in foreign currency from 15 to 20%, in order to mitigate potential risks affecting the financial stability. The next committee meeting is scheduled for June 15, 2016.