Major US stock indexes closed mixed as large-cap growth and AI-related stocks reversed early-week gains. The Russell 2000 and S&P MidCap 400 rose 1.30% and 1.26%, respectively, while the Nasdaq Composite fell 2.00%, the Dow 0.85%, and the S&P 500 0.57%. An early AI rally on upbeat earnings faded after results from Alphabet and Amazon revived concerns about returns on heavy capital spending. The 10-year Treasury yield eased to around 4.92% from about 5% a week earlier.
\nThe Federal Reserve held the federal funds rate at 3.75%–4.00% in a 10–2 vote, with both dissenters favoring another quarter-point hike after September's increase. The Fed upgraded its growth assessment to \"strong\" from \"solid\" and still described inflation as elevated, while Chair Kevin Warsh offered little guidance on a December move. Data supported this view: Q3 GDP grew at a 3.4% annualized rate, above estimates of around 3.0%, and September PCE inflation reached 3.6% year over year, with core at 3.1%.
\nThe STOXX Europe 600 gained 1.73% in local currency terms, shaped by earnings season, Middle East developments, and the ECB's decision to hold rates. Germany's DAX rose 2.53%, France's CAC 40 2.40%, Italy's FTSE MIB 1.94%, and the UK's FTSE 100 0.37%.
\nFitch revised Georgia’s outlook to positive
On 30 October 2026, Fitch affirmed Georgia’s sovereign credit rating at BB and revised the outlook to positive from stable. According to Fitch, the positive outlook reflects Georgia’s significant reserve accumulation, the prospect of sustainably lower current account deficits, and very strong growth, with GDP expanding by over 8% on average in 2023-25, more than twice the ‘BB’ median. The ratings are also supported by a credible macro-fiscal policy framework, moderate public debt, and a sound banking sector. Fitch forecasts growth of 7.5% in 2026, gradually easing toward its 5.0% medium-term potential over 2027-28.
Growth at 7.4% in 9M26
Real GDP growth in Georgia was 6.0% y/y in Sep-26, following 6.3% in August, bringing the 9M26 average to 7.4% y/y. Growth in September was driven mainly by construction, ICT, mining, trade, and financial services, while manufacturing contracted.
We maintain our 2026 real GDP growth forecast at 7.5% for 2026 and 6.0% for 2027 (see latest macro forecasts here).
Bank lending increased by 16.9% y/y in Sep-26
Bank credit growth accelerated to 16.9% y/y (excluding FX effects) in Sep-26, from 14.8% in August, lifting the loan book to GEL 78.1bn (US$ 30.0bn). The pickup was driven by corporate lending, which strengthened markedly to 15.3% y/y from 11.7% y/y in prior month, while retail lending continued to outpace at 18.3% y/y (17.5% in August). On the funding side, deposit growth remained robust at 20.5% y/y (excluding FX effects), following a 21.7% y/y rise in the previous month, bringing total deposits to GEL 77.4bn (US$ 29.7bn).
De-dollarization stays on track. Loan dollarization edged up 0.25ppts m/m to 41.5% in September, while deposit dollarization fell 0.23ppts m/m to a record low of 43.0%. Both ratios remain below year-ago levels, down 0.34ppts and 6.28ppts y/y, respectively.
NBG purchased US$ 248.5mn in Sep-26
The NBG continued its interventions in the FX market, buying US$ 248.5mn via the BMatch platform in Sep-26 and bringing its total net purchases to US$ 3.4bn in 9M26.
Top 3 highlights from Georgia's monthly economic review:
\n1. GEL strengthens, reserves hit a record. GEL firmed 0.4% m/m against the US$ in Oct-26. NBG’s FX purchases of US$ 248.5mn in Sep-26 lifted reserves to a record US$ 8.2bn, or 128% of the IMF ARA metric. We expect GEL/US$ to stay stable through 2027.
\n2. Tourism revenues outpace arrivals. Arrivals were broadly flat at 5.3mn in 9M26 (+0.1% y/y), but revenues rose 4.4% y/y to US$ 3.8bn, pointing to higher spending per visitor. We forecast revenues at US$ 4.9bn in 2026.
\n3. Healthy credit and deposit momentum. Bank credit rose 16.9% y/y (ex-FX) in Sep-26 and deposits 20.5% y/y, while both loan and deposit dollarization stayed below year-ago levels, at 41.5% and 43.0%.
\nMajor US stock indexes closed the week mixed as concerns over AI-related spending and financing weighed on large-cap tech shares, while small-cap and value stocks outperformed. The Russell 2000 led with a 2.00% gain, followed by the Dow (+0.41%). The Nasdaq Composite and S&P 500 fell 0.71% and 0.47%, respectively. Housing data stayed weak: the NAHB Housing Market Index dropped to 29, its lowest since 2012, and September pending home sales plunged 7.3%. Initial jobless claims fell to 194,000, the lowest since July, and the flash composite PMI eased to 57.6, still near a five-year high.
\nAhead of Wednesday’s Fed monetary policy statement, the 10-year Treasury yield fell below 5% for the first time in about a month, settling around 4.99%. Tech weakness and geopolitical uncertainty boosted demand for government bonds. Price pressures remained firm: businesses reported the sharpest selling-price increase since August 2022, and one-year consumer inflation expectations rose to 4.7%.
\nThe STOXX Europe 600 fell 1.39% in local currency terms, weighed by soaring oil prices, Middle East tensions, inflationary pressures and domestic political unrest. Germany’s DAX lost 1.72%, France’s CAC 40 2.19%, Italy’s FTSE MIB 2.60% and the UK’s FTSE 100 1.76%.
\nTourism revenues at US$ 3.8bn in 9M26
International visitors to Georgia (tourists and same-day visitors) increased by 3.3% y/y to 2.6mn in 3Q26. Tourist arrivals, 82.1% of the total, expanded by 4.7% y/y to a quarterly record of 2.1mn, while same-day arrivals declined by 2.8% y/y. Growth was driven by visitors from the EU (+16.6% y/y), Russia (+4.7%), Azerbaijan (+36.2%, gaining momentum after Baku-Tbilisi passenger rail services resumed in May), Israel (+19.1%, returning to growth after declining by 11.6% in 2Q26), China (+30.2%, underpinned by improved air connectivity, including direct Shanghai-Tbilisi flights launched in July) and Ukraine (+21.3%). In contrast, arrivals from Türkiye (-7.4% y/y), Armenia (-4.0%), India (-25.9%) and Saudi Arabia (-32.8%) decreased.
Over 9M26, international arrivals were broadly unchanged at 5.3mn (+0.1% y/y): tourist arrivals increased by 2.3% to 4.4mn, while same-day visits declined by 9.0% to 0.9mn.
Revenue performance was markedly stronger. Tourism inflows accelerated by 11.9% y/y to a quarterly record of US$ 1.9bn in 3Q26, bringing the 9M26 total to US$ 3.8bn (+4.4% y/y).
We forecast tourism revenues of US$ 4.9bn in 2026 and US$ 5.3bn in 2027.
NBG kept its key rate unchanged at 8.25%
On 21 October 2026, the NBG’s Monetary Policy Committee kept the policy rate at 8.25% for a 4th consecutive meeting. According to the NBG, energy prices accounted for around 2ppts of September’s 5.6% annual inflation, reflecting prolonged tensions in the Middle East. The more persistent components of inflation remain below headline: core and services inflation stood at 3.5% and 3.7%, respectively, which, in the regulator’s view, indicates that the impact of the supply shock on inflation expectations is so far moderate. Meanwhile, the NBG raised its 2026 inflation forecast by 0.2ppts to 5.4% and upgraded its growth forecast to 7.2%. It explained that, as inflation is driven mainly by external factors, the current moderately tight stance aims to keep inflation expectations and second-round effects in check. The regulator also signaled that further moderate tightening may be needed if the prolonged shock pushes expectations higher, and that normalization will begin once the shock fades.
The next MPC meeting is scheduled for 16 December 2026.
In Aug-26, sales declined m/m, in line with the usual seasonal slowdown, but remained well above last year’s level on both the primary and secondary markets. Declining interest rates continued to support market activity. On the supply side, the area of issued permits declined y/y after two consecutive months of growth. Prices continued to rise on both markets, while increased rent price lifted rental yield to 8.7%.
\nVisitors
\nInternational visitor arrivals returned to growth in 3Q26, rising by 3.3% y/y to 2.6mn. Tourists reached a quarterly record of 2.1mn (+4.7% y/y), while same-day visitors declined to 0.5mn (-2.8%). Visitor growth was led by the EU (+16.6% y/y), Russia (+4.7%) and Azerbaijan (+36.2%), with arrivals from Azerbaijan accelerating after Baku-Tbilisi passenger rail services resumed in May. Israel returned to growth (+19.1%) after an 11.6% decline in 2Q26, as Iran conflict-related travel disruptions eased and pent-up travel demand materialized in 3Q26. Visitors from China also recorded strong growth (+30.2%), supported by improved air connectivity, including the launch of direct Shanghai–Tbilisi flights in July.
\nIn contrast, visitors from Türkiye (-7.4% y/y), Armenia (-4.0%) and India (-25.9%) declined, with fewer same-day visitors driving the drop from Türkiye and IndiGo flight suspensions weighing on arrivals from India. Gulf markets also remained weak, with visitors from Saudi Arabia down 32.8% y/y.
\nOverall, visitor numbers remained broadly flat at 5.3mn in 9M26 (+0.1% y/y), while the mix shifted toward overnight tourism: tourist visits increased by 2.3% to 4.4mn, whereas same-day visits declined by 9.0% to 0.9mn.
\nRevenues
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Tourism revenues increased by 11.9% y/y to US$1.9bn in 3Q26. The growth was driven mainly by Russia (+32.3% y/y), the EU (+30.2%) and Israel (+24.8%), as well as from Ukraine (+52.5%) and Azerbaijan (+18.6%). In contrast, revenues declined from Saudi Arabia (-31.9%) and Türkiye (-11.5%), mirroring weaker arrivals.
\nOverall, tourism revenues increased by 4.4% y/y to US$3.8bn in 9M26. We maintain our 2026 forecast for tourism revenues of US$4.9bn.
\nHigher hydropower generation reduced thermal output and imports. In September 2026, domestic electricity consumption grew 1.5% y/y to 1.1 TWh. Favorable hydrological conditions supported an 8.3% y/y increase in hydropower generation despite technical disruptions at Enguri HPP. Renewables accounted for 77.5% of total supply, up from 71.9% in Sep-25, while thermal generation and imports declined by 15.4% and 68.4% y/y, respectively. Net-metered generation lowered electricity consumption reported in official statistics: real growth of electricity was 3.3% instead of 1.5% in official statistics (see page 3 for details).
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9M26 results highlight seasonal challenges. Electricity consumption increased by 2.6% y/y to 10.9 TWh in 9M26. Growth was stronger early in the year and slowed over the summer, largely due to weather conditions. Exports of Georgian electricity to Turkey fell by 51.1% y/y, reflecting lower electricity prices and higher generation in Turkey. As a result, total demand for Georgian electricity declined by 0.2% y/y.
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The 9M26 supply mix reflects the seasonal pattern of hydropower and hydrological conditions in 2025-26. Renewables accounted for 36% of total supply in Jan-26 and 98% in Jun-26. Low demand in May-July also led to generation curtailments, estimated at a total of 0.5 TWh. In 9M26, renewables met 74.2% of electricity demand, while the remaining 25.8% was supplied through imports and thermal generation fueled by imported natural gas (vs 24.1% in 9M25).
\n\n
9M26 results highlight the need to reassess sector policy. In our view, investment support should reflect power system needs, prioritizing projects by their generation profile and contribution to system reliability. CFD terms and tariffs should reflect these priorities.
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September’s headline inflation looks reassuring, yet it is flattered by a one-off cut in university tuition: excluding that effect, inflation was above 6% by our estimate, driven mainly by transport (largely fuel) and healthcare. Much of that pressure comes from abroad, and a higher rate would do little to lower fuel prices - so, on its own, it does not justify a hike. The stronger argument for tightening is the Fed’s September hike, which has narrowed the gap between lari and dollar rates. Whether or not the NBG hikes, we expect up to 50bps of cuts in 2H27.
Inflation is high, but the pressure comes from abroad
Headline inflation held at 5.6% y/y in September, helped by a one-off: tuition at state universities is free from the 2026-27 academic year, and because the CPI measures what households actually pay, this enters the index as a price cut. Excluding education, inflation would have been above 6% by our estimate.
The extra pressure comes mainly from transport costs, largely fuel. Renewed tanker attacks in the Strait of Hormuz pushed Brent back above US$ 100 in October, and energy prices kept rising (Figure 2). This is a cost shock from outside Georgia, and a higher policy rate cannot bring oil prices down.
At home, price pressures are easing
Domestic indicators point the other way. Core inflation slowed to 3.5% y/y and services inflation to 3.7% from 4.4% - partly because of tuition - while food inflation slowed sharply and economic growth moderated to 6.3% y/y in August. With demand cooling and the main pressure coming from abroad, current inflation alone does not, in our view, justify a hike.
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IMF updates world economic outlook
On 13 October 2026, the IMF released its October World Economic Outlook, projecting global growth at 3.1% in 2026, 0.1ppts above the July forecast, and 3.4% in 2027, unchanged. The upgrade reflects the economy’s resilience: the AI-driven investment boom and flexible adjustment in energy markets have largely offset the drag from the Middle East war. Global inflation is expected to pause its decline, rising from 4.1% in 2025 to 4.7% in 2026 on higher energy and food prices, before easing back to 4.1% in 2027. For Georgia, the IMF raised its 2026 growth forecast by 0.7ppts to 7.2%, while keeping its 2027 projection unchanged at 5.7%.
Goods exports at US$ 731.5mn in Sep-26
In Sep-26, goods exports increased by 4.0% y/y to US$ 731.5m, slowing from 24.6% y/y growth in August, mainly reflecting last year’s high base effect. In contrast, goods imports growth accelerated to 15.3% y/y, reaching US$ 1.8bn, up from 6.4% y/y in previous month. Consequently, the trade deficit widened by 24.6% y/y to US$ 1.1bn in September.
Overall, in 9M26 the trade deficit decreased by 3.3% y/y to US$ 8.2bn, as exports grew by 19.6% y/y to US$ 6.2bn and imports were up by 5.3% y/y to US$ 14.4bn.
Money transfers at US$ 285.8mn in Sep-26
Money transfers declined by 10.1% y/y to US$ 285.8mn in Sep-26, after falling by 8.2% y/y in previous month. The decline was mainly driven by a sharp drop in transfers from Russia (-80.1% y/y to US$ 7.6mn), after the major Russian money transfer system suspended transfers to Georgia and several other countries at end-July, as its operator was included in the EU’s latest sanctions package. In contrast, transfers from other top remitting countries continued to grow, led by the USA (+6.2% y/y), Israel (+13.1% y/y) and Türkiye (+10.4% y/y).
Overall, in 9M26 money transfers were up by 5.4% y/y to US$ 2.8bn.
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Major US stock indexes closed the week mostly lower as a sell-off in AI-related stocks, hotter-than-expected inflation and the start of third-quarter earnings season drove a rotation from large-cap growth into value and defensive segments. The Nasdaq Composite fell 4.48% and the Russell 2000 lost 3.05%, while the Dow added 0.67%. Concerns over AI financing needs, valuations and returns weighed on semiconductor and memory stocks. September CPI rose 3.7% y/y (consensus 3.6%), with core at 2.6%. PPI jumped 6.3% y/y, the largest since December 2022. Retail sales rose 0.8%, driven by gas stations, though control group sales grew just 0.1%. The 10-year Treasury yield fell to about 5.09% from 5.24% as tech weakness fueled demand for bonds.
\nFed Chair Kevin Warsh offered little guidance ahead of the October meeting. He said the central bank no longer prejudges outcomes and urged investors to focus on the economy. CME FedWatch priced a 17% probability of a hike, little changed despite the inflation surprises.
\nIn Europe, the STOXX Europe 600 rose 2.09% as earnings season began, though Middle East tensions and energy prices remained key drivers. Germany’s DAX gained 2.13%, France’s CAC 40 1.97%, Italy’s FTSE MIB 0.22% and the UK’s FTSE 100 3.13%.
\nInternational reserves at US$ 8.2bn in Aug-26
Gross international reserves climbed 50.5% y/y to a fresh record of US$ 8.2bn in Sep-26, equivalent to c.128% of the IMF’s reserve adequacy (ARA) metric and comfortably above the 100% adequacy threshold. On a monthly basis, reserves edged up 0.3% (+US$ 26.5mn). The monthly change largely reflects government and banking-sector FX operations and the NBG’s FX purchases on the Bmatch platform (details due on 26 October), partly offset by a US$ 97.3mn drag from the fall in gold prices in September. Notably, monetary gold accounted for 12.9% of total reserves at end-Sep-26.
Tourism revenues estimated at US$ 525mn in Sep-26
Tourism revenues increased by 7.7% y/y to US$ 525mn in Sep-26, based on our estimates. Cumulatively, 9M26 tourism revenues stood at US$ 3.7bn (+2.5% y/y).
We forecast tourism revenues at US$ 4.9bn in 2026.
Major US stock indexes finished the week mixed amid volatility in AI-related stocks, Middle East developments, and sharp moves in energy prices and Treasury yields. The S&P 500 advanced 1.15%, while the Dow and Nasdaq added 0.93% and 0.64%, respectively, and the Russell 2000 declined. Brent crude briefly topped USD 105 per barrel on Thursday amid reports of further tanker attacks in the Strait of Hormuz, before retreating after President Trump said the US would not attack Iran ahead of November’s midterms. 10-year and 30-year Treasury yields rose to their highest since 2002 before easing on stronger-than-expected auctions.
\nMinutes from the Fed’s September meeting, where officials unanimously raised rates by 25bps, showed most policymakers anticipated another hike by year-end, though timing remained unclear. Data underscored inflation pressures: the ISM services prices index climbed to 74.0, its highest since July 2022, while University of Michigan consumer sentiment fell to a five-month low of 46.3, with year-ahead inflation expectations edging up to 4.7%.
\nThe STOXX Europe 600 ended broadly unchanged (+0.03%), as Middle East tensions, a more hawkish ECB backdrop, mixed eurozone industrial data, and softer UK activity indicators shaped sentiment. Germany’s DAX fell 0.57%, France’s CAC 40 1.19%, and Italy’s FTSE MIB 1.46%, while the UK’s FTSE 100 climbed 0.86%.
\nMonth in Review
The Federal Reserve raised rates by 25 basis points in September, its first hike since 2023, lifting the benchmark rate to 3.75% - 4.00% in a unanimous vote. With headline CPI holding at 3.4% in August, well above the 2% target, policymakers prioritized inflation, and the September dot plot's median of 4.125% signaled one more hike this year. That hawkish shift pushed the 10-year Treasury yield to its highest level since 2007. The labor market has since weakened further, however: payrolls rose by just 29,000 in September, well below expectations, cutting October rate-hike odds to roughly 14%.
The ECB followed with its own 25-basis-point hike in September, its second this year after June's first increase in nearly three years, lifting the deposit rate to 2.50%. The mid-year relief from cooling prices and falling oil has reversed. Attacks on Gulf oil infrastructure pushed Brent crude to a September average of $114 before it eased back toward $100, and Eurozone inflation jumped to a three-year high of 3.8%. With core inflation edging up to 2.5% and Germany's infrastructure-and-defense spending swelling debt issuance, the 10-year Bund yield climbed above 3.6% in late September, a fresh multi-year high, leaving European bond markets in a volatile tug-of-war.
Georgian Market
In September-26, one bond was issued on the Georgian local corporate bond market: MFO Rico Express LLC (USD 10mn, 3-year). Meanwhile, no bonds have reached maturity during the month.