Weekly Market Watch

Real GDP growth accelerated in Feb-24
Georgia’s real GDP growth accelerated, up by 9.5% y/y in Feb-24, after growing by 5.8% in previous month. Cumulatively, real GDP growth reached 7.7% y/y in 2M24. The manufacturing, construction, professional & scientific activities, ICT and transport sectors were the primary drivers of growth in February. In contrast, the energy and mining sectors contracted during the same period. 
For 2024, we forecast real GDP to grow by 6.0% in our baseline scenario and by 7.0% in upside scenario (see latest macro forecast here).

Moody’s changes Georgia’s outlook to stable from negative 
On 26 March 2024, Moody’s Affirmed Georgia’s sovereign credit rating at Ba2 and changed the outlook to stable from negative. Moody's expects Georgia's economic growth to stabilize at 5.5% in 2024 and remain around 5-5.5% in the medium term. 
CA deficit at historically low level in 2023
Current account (CA) deficit stood at 6.7% of GDP in 4Q23, down from 7.4% of GDP in 4Q22, according to NBG. The annual reduction in the CA deficit in 4Q23 was supported by a 8.7% y/y decline in the goods trade deficit.
Overall, in 2023, CA deficit reached a historically low level of 4.3% of GDP (in line with our forecast), down from 4.5% of GDP in 2022. This improvement was fueled by robust growth in the services balance (+25.5% y/y), particularly in tourism (+17.3% y/y) and ICT services (+53.2% y/y), as well as a 9.1% y/y increase in the transfers balance. FDI remained the key funding source of the CA deficit, with net FDI at 4.3% of GDP. We forecast CA deficit at 4.7% of GDP in 2024.

Bank lending increased by 16.4% y/y in Feb-24
In Feb-24, the banking sector loan portfolio increased by 16.4% y/y (+1.1% m/m), excluding FX effect, after a 16.0% y/y growth in previous month. In unadjusted terms, loan portfolio rose by 17.5% y/y (+0.7% m/m), reaching GEL 52.2bn (US$ 19.6bn), after growing 16.7% y/y in Jan-24. By sector, corporate loans increased by 19.0% y/y (exc. FX effect) in February and retail loans were up 14.3% y/y. Loan dollarization reduced to 44.3% (-0.39ppts y/y and -0.40ppts m/m) in Feb-24.
Bank deposits increased by 14.8% y/y (exc. FX effect) to GEL 50.5bn (US$ 19.0bn) in Feb-24, after growing by 15.3% y/y in previous month. In terms of currency breakdown, GEL deposits increased by 28.4% y/y and FX deposits growth (exc. FX effect) stood at 3.6% y/y. As a result, the level of deposit dollarization came in at 49.8% (-4.92ppts y/y and +0.06ppts m/m) in Feb-24.

NBG purchased US$ 77.5mn in Feb-24
In Feb-23, NBG purchased US$ 77.5mn through the BMatch platform to build reserves. Overall, in 2M24, NBG’s net FX purchases reached US$ 85.6mn.