NBG keeps key rate unchanged at 10.0%
On 25 October 2023 meeting, the NBG kept its key rate unchanged at 10.0%, following a 100bps cut from May to September 2023. Inflation in Georgia remains below the target level, with annual inflation standing at 0.7% and core inflation at 2.5% as of Sep-23. The NBG attributes the low inflation to the diminishing price pressures resulting from the pandemic and the Russia-Ukraine war, along with the influence of a tight monetary policy. Based on NBG’s current forecast, inflation is expected to remain below the 3.0% target level in the upcoming months and stabilize at around target in 2024. While there are positive developments, the NBG emphasizes significant uncertainty due to the ongoing geopolitical tensions, including the Middle East conflict. Given these risks, the NBG decided to keep tight monetary policy and proceed with the gradual normalization. Considering this, we revised our forecast and expect the key rate at 9.75% in Dec-23 and at 8.75% by end-2024 (25bps higher than our earlier estimate). The next committee meeting is scheduled for 20 December 2023.
Bank lending increased by 14.9% y/y in Sep-23
In Sep-23, the banking sector loan portfolio increased by 14.9% y/y (+2.0% m/m), excluding FX effect, after a 14.6% y/y growth in previous month. In unadjusted terms, loan portfolio rose by 13.7% y/y (+2.4% m/m), reaching GEL 49.2bn (US$ 18.4bn). By sector, corporate loans increased by 16.9% y/y and retail loans were up 13.3% y/y (excl. FX effect). In Sep-23, loan dollarization stood at 45.0% (-0.40ppts y/y and +0.06ppts m/m).
Bank deposits increased by 19.6% y/y (+2.0% m/m, excl. FX effect) to GEL 49.3bn (US$ 18.4bn) in Sep-23. In terms of currency breakdown, GEL deposits increased by 35.8% y/y (+38.0% y/y in previous month) and FX deposits grew by 7.6% y/y excluding FX effect (+7.2% y/y in previous month). As a result, the level of deposit dollarization came in at 50.2% (-6.81ppts y/y and +0.45ppts m/m) in Sep-23.
International visitors at 2.3mn in 3Q23
In 3Q23, international visitors to Georgia increased by 21.0% y/y to 2.3mn persons. This growth was mainly driven by a 15.4% y/y increase in tourist arrivals (1.73mn tourists or 75.0% of total arrivals), followed by same-day arrivals (+41.6% y/y). Russia was the top source country by international arrivals (24.9% of total), followed by Türkiye (21.7% of total) and Armenia (14.7% of total). Most visitors traveled to Georgia via land (69.2% of total), followed by air (29.8% of total).
Overall, 4.8mn international visitors traveled to Georgia in 9M23, with tourist arrivals comprising 3.7mn individuals (91.6% of 9M19 level). Additionally, there were 1.2mn same-day arrivals, recovering at 58.9% of 9M19 level (this recovery remains slow reflecting restrictions on border crossings from Azerbaijan).
