Real GDP growth was 6.2% y/y in Oct-23
Georgia’s economy grew by 6.2% y/y in Oct-23, in line with our expectation. Cumulatively, real growth came in at 6.9% y/y in 10M23. The financial, trade, transportation, and storage sectors were the primary drivers of growth in October. In contrast, the manufacturing and real estate sectors contracted during the same period. We keep our growth forecast unchanged at 6.8% for the full year 2023 and expect 5.0% growth for 2024 (see latest macro forecasts here).
NBG reduced the reserve norm on FX liabilities
On the unscheduled Monetary Policy Committee meeting held on November 29, 2023, the NBG decided to lower the upper limit of the reserve norm on short-term FX liabilities from 25% to 20%. The regulator clarified that this adjustment aims to enhance FX liquidity in the local market, mitigating the impact of tightened global financial conditions. We anticipate this step will also support the GEL. Regarding the monetary policy trajectory, we maintain our forecast and expect a 25bps rate cut to 9.75% in the final December meeting of this year and an additional 100bps cut to 8.75% by the end-2024.
Bank lending increased by 16.1% y/y in Oct-23
In Oct-23, the banking sector loan portfolio increased by 16.1% y/y (+1.5% m/m), excluding FX effect, after a 14.9% y/y growth in previous month. In unadjusted terms, loan portfolio rose by 15.9% y/y (+1.9% m/m), reaching GEL 50.1bn (US$ 18.5bn), after growing 13.7% y/y in September. By sector, corporate loans accelerated further, up by 19.3% y/y growth in October (+16.9% y/y in September, exc. FX effect) and retail loans were up 13.4% y/y (+13.3% y/y in September). In Oct-23, loan dollarization stood at 45.2% (+0.40ppts y/y and +0.21ppts m/m).
Bank deposits increased by 18.7% y/y (exc. FX effect) to GEL 49.8bn (US$ 18.4bn) in Oct-23. In terms of currency breakdown, GEL deposits increased by 36.9% y/y (+35.8% y/y in previous month) and FX deposits growth (exc. FX effect) stood at 5.1% y/y (+7.5% y/y in previous month). As a result, the level of deposit dollarization came in at 50.3% (-6.95ppts y/y and +0.15ppts m/m) in Oct-23.
