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Year: Month: All releases Economy Sectors Companies
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Regional Fixed Income Market Watch | November 2017

11 Dec, 2017

Highlights

  • US GDP growth in 3Q17 was revised up to an annualized 3.3% y/y (2nd estimate) from an annualized 3.0% y/y (advance estimate). Revised figures show that GDP growth in EU19 came in at 2.6% y/y in 3Q17, after 2.4% y/y growth in 2Q17.
  • Based on rapid estimates, economic growth in October 2017 came in at 17.6% y/y in Armenia, 5.7% y/y in Georgia, 1.4% y/y in Kazakhstan, and 0.5% y/y in Russia. In 10M17, GDP was up 2.0% y/y in Belarus and down 0.7% y/y in Azerbaijan.
  • Annual inflation in the US was down to 2.0% in October 2017 from 2.2% in the previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was up to 1.5% in November 2017 from 1.4% in October 2017.
  • In November 2017, annual inflation increased in Turkey (13.0%), Georgia (6.9%), and Armenia (2.2%) and decreased in Kazakhstan (7.3%) and Russia (2.5%). October 2017 figures indicate a decrease in annual inflation to 14.6% in Ukraine, 12.0% in Azerbaijan and 3.9% in Belarus.
  • There were no monetary policy rate changes in November 2017.

 

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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Georgia's Energy Sector - Electricity Market Watch | October 2017

29 Nov, 2017

The draft energy law was prepared by the Energy Community secretariat experts under the EU4ENERGY program. The draft envisages the implementation of a day-ahead market for electricity trading, adoption of the institute of a power supplier, creation of a system services trading platform, and unbundling of licensed activities, among other issues. The draft law does not have an answer, so far, to the most challenging question: how to integrate the existing PPAs into the day-ahead market without causing major distortions. Full implementation of the changes drafted in the document will require about two years after final approval. 

GNERC recalculated WACC components for each type of utility. As a result, the weighted average cost of capital (WACC) was increased from 13.54% to 16.40% for electricity generation, transmission, and distribution activities and was set at 13.54% and 15.99% for natural gas and water supply services, respectively. WACC is used by GNERC to guarantee licensed companies a reasonable return on investment and incentivize cost reduction. Another significant change in the tariff methodology was extending the tariff period for electricity distribution and transmission companies from one to three years. Notably, for natural gas distribution and water supply activities, the WACC methodology was adopted recently, for tariff years 2017-2018.

Tariffs were revised upward for Khrami 1 and Khrami 2 HPPs, as a result of the GEL depreciation against the Japanese yen and the US dollar. Both HPPs have long-term tariffs in place up till 2025. The tariffs are subject to revision once every three years, based on the USD/GEL exchange rate, and annually, based on the JPY/GEL rate (only for Khrami 2). The revisions amounted to an 18-20% increase in tariffs, based on the year, for 2018-2024. Notably, as the highest regulated tariff on the market, the tariff of Khrami 2 HPP serves as the reference price for the deregulated market. Unless any further changes take place, the price that ESCO will pay deregulated HPPs for balancing electricity will increase from 9.4 tetri/kWh to 11.25 tetri/kWh through end-2018.

Domestic consumption increased 7.2% y/y in October 2017 and 8.8% y/y in 10M17. The main driver of growth in October was a 61.7% y/y increase in direct consumption, driven by a 94.3% y/y increase in Ltd Georgian Manganese usage, which contributed 5.6 percentage points to overall growth. Consumption of distribution companies was up by a modest 3.5% y/y.

Growth in demand coincided with a drop in domestic supply, creating the need for electricity imports, which came from Azerbaijan. A 10.7% y/y decrease in hydro and 6.0% y/y decrease in thermal generation resulted in an 8.6% y/y decline in domestic supply. The decrease in hydro generation was due largely to a 27.3% y/y drop in Enguri/Vardnili generation, from a high base in Oct-2016 (+44.8% y/y). Generation of other regulated HPPs was also down 11.6% y/y. Deregulated HPPs were the only group of HPPs posting an increase in Oct-2017 (+38.3% y/y), solely due to the addition of sizable HPPs (Dariali, Khelvachauri, and Shuakhevi) to the group.


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Georgia's Tourism Sector - Tourism Market Watch | October 2017

20 Nov, 2017

Turkish Airlines maintains the leading position on the Georgian market by number of passengers served in 9M17. However, the increased competition over the last two years has weakened the airline’s lead. Its share on the Georgian market has almost halved from 19.8% in 2015 to 11.2% in 9M17. Georgian Airways, the only local carrier on the market, is close behind, with 9.6% of the market. Since the addition of direct flights from Kutaisi to European cities, Wizz-Air’s competitive position on the Georgian market has strengthened considerably.

The share of air travel in total arrivals to Georgia is on the rise, thanks to improvements in air connectivity and growth in the number of visitors from secondary source markets. The number of visitors arriving by air was up 49.0% y/y to 1.4mn in 10M17 and accounted for 21.5% of total arrivals, up from 13.5% in 10M15.

The number of international arrivals was up 15.2% y/y to 0.61mn in October 2017. Out of the top four source markets, there was strong growth from Russia (+30.3% y/y), Armenia (+12.7% y/y), and Azerbaijan (+9.1% y/y). The number of visitors from Turkey also increased (+2.4% y/y) for the fourth consecutive month, but the increase was a modest one. Arrivals from the EU were up 17.4% y/y to nearly 30,000 visitors.

Secondary source markets also posted robust performances in 10M17. Arrival growth from secondary (non-EU) source markets contributed 3.8ppts to the overall growth of 18.8% y/y. The number of Israeli visitors increased 35.9% y/y to over 115,000 visitors, while the number of visitors from Saudi Arabia was up 171.5% y/y to almost 55,000. Arrivals from the EU were up 24.0% y/y to over 293,000 visitors in 10M17, with Germany, Poland, and UK accounting for a third of the growth.


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Regional Fixed Income Market Watch | October 2017

9 Nov, 2017

Highlights

  • US GDP in 3Q17 grew at an annualized rate of 3.0% y/y (‘advance’ estimate) after expanding 3.1% y/y in 2Q17. The growth reflected increases in consumer spending, inventory and business investments, and export. GDP growth in EU19 was higher at 2.5% y/y in 3Q17 after 2.3% in 2Q17 and 2.0% in 1Q17. The Chinese economy grew 6.8% y/y in 3Q17.
  • Based on rapid estimates, economic growth in September 2017 came in at 6.0% y/y in Kazakhstan, 5.0% y/y in Georgia, 2.5% y/y in Armenia, and 2.0% y/y in Russia. In 9M17, GDP was up 1.7% y/y in Belarus and down 0.6% y/y in Azerbaijan.
  • Annual inflation in the US was up to 2.2% in September 2017 from 1.9% in the previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was down to 1.4% in October 2017 from 1.5% in September 2017.
  • In October 2017, annual inflation increased in Turkey (11.9%), Kazakhstan (7.7%), Georgia (6.4%), and Armenia (1.2%) and decreased in Russia (2.7%). September 2017 figures indicate an increase in annual inflation to 16.4% in Ukraine and decreases to 13.1% and 4.9% in Azerbaijan and Belarus, respectively.
  • In October 2017, in response to low inflation, the Russian and Belarusian central banks lowered monetary policy rates further to 8.25% and 11.0%, respectively, while the Ukrainian central bank raised its monetary policy rate to 13.5%, given increased price pressure. The policy rate has remained unchanged in other countries.

 

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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