Real GDP growth was 5.9% y/y in Nov-23
Georgia’s economy grew by 5.9% y/y in Nov-23, after growing by 6.2% in previous month. Cumulatively, real growth reached 6.9% y/y in 11M23, in line with our 6.8% growth projection for the full year 2023. The financial, construction, professional & scientific activities and trade sectors were the primary drivers of growth in November. In contrast, the manufacturing, energy and transportation sectors contracted during the same period.
For 2024, we anticipate a growth rate of 5.4% in our baseline scenario and 6.0% in upside scenario (see details here).
Average annual inflation at 2.5% in 2023
In Dec-23, annual inflation in Georgia stood at 0.4%, with average annual inflation reaching 2.5% for the year. The subdued inflation was driven by a 3.1% y/y decline in food prices, along with reduced inflation for imported and mixed goods by 0.2% y/y and 4.3% y/y in December, respectively. Domestically produced goods inflation reached 3.6% y/y in Dec-23 and core inflation remained low at 1.9% y/y. By categories, annual inflation in Dec-23 was mostly driven by price changes in food and non-alcoholic beverages (-2.7% y/y, -0.92ppts), healthcare (-3.8% y/y, -0.37ppts), transport (+5.1% y/y, +0.65ppts), alcoholic beverages & tobacco (+3.4% y/y, +0.24ppts) and utilities (+2.3% y/y, +0.24ppts) categories.
We forecast average annual inflation at 3.5% for 2024.
CA deficit at historically low level in 9M23
Current account (CA) deficit reached a historically low level of 2.6% of GDP in 9M23, down from 3.2% in 9M22. This improvement was driven by strong growth in the services balance (+36.9% y/y), particularly in tourism (+29.2% y/y) and ICT services (+87.0% y/y), as well as a 6.4% y/y increase in the transfers balance. FDI remained the key funding source of CA deficit, with net FDI at 5.2% of GDP. We forecast CA deficit to improve further and project it at 4.3% of GDP in 2024 down from 4.5% in 2023E.
Bank lending increased by 16.3% y/y in Nov-23
In Nov-23, the banking sector loan portfolio increased by 16.3% y/y (+1.4% m/m), excluding FX effect, after a 16.1% y/y growth in previous month. In unadjusted terms, loan portfolio rose by 17.3% y/y (+2.1% m/m), reaching GEL 51.2bn (US$ 18.9bn), after growing 15.9% y/y in October. By sector, similar to previous month corporate loans increased by 19.3% y/y in November (exc. FX effect) and retail loans were up 13.7% y/y (+13.4% y/y in October). In Nov-23, loan dollarization stood at 45.5% (+0.63ppts y/y and +0.30ppts m/m).
Bank deposits increased by 17.8% y/y (exc. FX effect) to GEL 50.4bn (US$ 18.6bn) in Nov-23. In terms of currency breakdown, GEL deposits increased by 34.6% y/y (+36.9% y/y in previous month) and FX deposits growth (exc. FX effect) stood at 4.9% y/y (+5.1% y/y in previous month). As a result, the level of deposit dollarization came in at 50.8% (-5.97ppts y/y and +0.42ppts m/m) in Nov-23.
