Georgia continues to deliver the strongest economic recovery in the region with real GDP growth at 10.5% in 10M21 (up 3.7% vs 10M19). The GEL also strengthened amid recovery of external inflows and tight monetary policy. We expect growth at 10.5% for the full year 2021 and forecast growth at 5.0% in 2022. NBG hiked the key rate by 50bps to 10.5% at December meeting, remaining concerned about high running inflation (12.5% in November) and inflation expectations. We expect inflation to decelerate from spring 2022 and see room for the rate cut by 200bps in 2H22.The banking sector loan portfolio growth is healthy (up 16.1% y/y exc. FX-effect, and up 14.7% y/y in nominal terms), below nominal GDP growth (22.0%), and we expect it to continue double digit growth amid decent recovery dynamics despite tight monetary policy.
