Real GDP grew by 7.0% y/y in May-23
Georgia’s economy continued strong growth, with real GDP up by 7.0% y/y in May-23, after a 7.5% y/y growth in previous month, based on Geostat’s rapid estimates. Cumulatively, real growth came in at 7.5% y/y in 5M23. The expansion in May was primarily driven by construction, ICT, trade, financial, transportation and storage sectors, while the manufacturing and real estate sectors experienced contraction. Given the faster-than-expected reduction in the GDP deflator and upward revision of 1Q growth figure, we expect GDP growth at 6.8% in 2023, revised upwards from the previous projection of 5.8% (see updated macro forecasts here).
CA deficit reduced significantly to 3.2% of GDP in 1Q23
The Current Account (CA) deficit reduced sharply, down by 67.7% y/y to 3.2% of GDP in 1Q23, from 13.3% in 1Q22, according to NBG. This improvement was due to the strong growth in the service balance (reflecting tourism revenue growth of 102.0% y/y to US$ 795.4mn), followed by transfers balance (+36.1% y/y). The merchandize trade deficit, traditionally the major contributor to deficit creation, increased by 25.2% y/y to US$ 1.3bn, as exports increased by 24.2% y/y and imports were up 24.6% y/y. Notably, the positive balance in services and transfers was 1.1x higher than the trade deficit in 1Q23. In addition, the net FDI (6.1% of GDP) was 1.9x higher than CA deficit in 1Q23. Considering 1Q and ongoing data of FX inflows, we project CA deficit at 3.8% of GDP in 2023, improvement from our previous forecast of 5.4%.
Loan portfolio up 12.8% y/y in May-23
In May-23, the banking sector loan portfolio grew by 12.8% y/y (+0.9% m/m), excluding FX effect, after a 13.2% y/y growth in previous month. In unadjusted terms, loan portfolio increased by 6.1% y/y (+2.1% m/m) to GEL 45.7bn (US$ 17.6bn), after growing by 3.7% in April. By sector, corporate loans growth was 10.3% y/y in May (+10.9% y/y in April, exc. FX effect) and retail loans growth stood at 15.0% y/y (+15.2% y/y in April). Notably, the mortgages growth came in at 11.8% y/y in May, after a 11.5% y/y growth in previous month. In May-23, loan dollarization stood at 44.5% (-4.28ppts y/y and +0.56ppts m/m) and NPLs at 1.8% (-0.16ppts y/y and +0.04ppts m/m).
Bank deposits growth accelerated to 31.2% y/y (+3.8% m/m, exc. FX effect) to GEL 45.5bn (US$ 17.5bn) in May-23, after a 28.7% y/y growth in April. In terms of currency breakdown, GEL deposits growth accelerated further to 44.8% y/y (+39.1% y/y in previous month) and FX deposits growth (exc. FX effect) slowed to 21.3% y/y (+21.5% in previous month). As a result, the level of deposit dollarization decreased further to 50.5% (-7.66ppts y/y and -0.82ppts m/m) in May-23.
NBG purchased US$ 154.7nm in May-23
In May-23, NBG purchased US$ 154.7mn through the BMatch platform, after a record high monthly purchase of US$ 322.4mn in April. Overall, in 5M23, NBG’s FX purchases reached US$ 937.6mn.
