FDI up 1.4% y/y in 3Q21
FDI increased by 1.4% y/y to US$ 299.0mn in 3Q21, after increasing by 23.9% y/y in 2Q21 (revised upwards by US$ 63.5mn reflecting the adjustment of reinvestments in the financial sector), according to Geostat’s preliminary figures. The 3Q21 FDI figure reflected mainly reinvestments, amounting to US$ 293.3mn (+138.1% y/y, 98.1% of total FDI). The financial sector was the largest FDI recipient at US$ 87.1mn (-32.9% y/y, 29.1% of total), followed by energy sector at US$ 69.3mn (+101.5% y/y, 23.2% of total), manufacturing at US$ 54.8mn (+88.8% y/y, 18.3% of total) and transport and communications at US$ 42.5mn (+300.6% y/y, 14.2% of total). UK topped the list of investors with US$ 60.9mn (-47.1% y/y), followed by Netherlands at US$ 59.8mn (-33.9% y/y) and Czech Republic at US$ 36.0mn (+528.9% y/y). Overall, FDI was up by 3.2% y/y to US$ 728.4mn (5.5% of GDP) in 9M21.
NBG raises the key rate to 10.5%
The NBG increased the key rate by 50pbs to 10.5% on 8 December 2021 for the 4th time this year, after raising it by 50bps in August. The NBG remains concerned with the persistently high inflation which stood at 12.5% in Nov-2021, slightly lower than in October. According to the central bank, the high inflation is mainly driven by exogenous factors, including increased commodity prices on international markets (contributing 9ppts to inflation), which leads to higher imported inflation (18% in November) in Georgia. From other factors affecting inflation were mentioned strong demand fuelled by fiscal stimulus, re-opening of the economy and bank lending growth and inflationary expectations (stemming from an extended period of above-target inflation). The central bank said it will keep its monetary policy tight until inflation declines, which it expects to happen in spring 2022, before increasing further through December-February due to a temporary additional contribution from utility subsidies.In addition, supporting the larization process, the NBG decided to link a currency-induced credit risk (CICR) buffer to loan portfolio dollarization, which will come into effect from January 1, 2022. Up to 40% loan dollarization, a bank’s individual CICR buffer will be set at 40% risk-weight and above this cap, each percentage change in loan dollarization will increase the CICR risk-weight by 3ppts until it reaches 100%. The regulator also lowered the maximum term of FX mortgages from 15 to 10 years to protect FX borrowers from interest rate and currency risks.
International reserves at US$ 3.9bn in November 2021
Gross international reserves increased by 4.7% y/y to US$ 3.9bn in November 2021 according to NBG. On a monthly basis, the reserves were down by 0.8% (-US$ 30.5mn). Changes in reserves were attributed to the government and banking sector FX operations, and/or asset revaluation.
