Weekly Market Watch

Real GDP shrinks 7.9% y/y in December 2020 
Georgia’s economy contracted by 7.9% y/y in December 2020, almost same level as in November despite 2nd lockdown introduced in reporting month. Notably, contraction in December was almost half of April-May’s (-15.1% y/y) decline, as many types of economic activities were allowed during the 2nd lockdown compared to the 1st one. In December, positive real growth was recorded in financial & insurance activities, water supply, sewerage & waste management activities, information & communication and mining sectors. Meanwhile, real growth was down in accommodation, construction, recreation, manufacturing, transportation and trade sectors. Overall, in 2020, Georgia’s economy contracted by 6.1% y/y in line with our expectations. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics. 

NPLs at 2.3% in December 2020 
In December 2020, the banking sector loan portfolio increased by 9.1% y/y and 2.2% m/m (exc. FX effect). In unadjusted terms, loan portfolio was up 19.7% y/y and 2.3% m/m, amounting to GEL 38.2bn (US$ 11.7bn). By currency, the GEL-denominated loans rose by 18.9% y/y (+2.1ppts m/m), and foreign currency loans increased by 1.1% y/y (exc. FX effect). By sector, corporate lending increased by 8.2% y/y and 3.0% m/m, while retail loan growth was 9.8% y/y and 1.5% m/m (exc. FX effect). In December 2020, loan dollarization stood at 55.3% (+0.50ppts y/y and -0.79ppts m/m) and NPLs stood at 2.3% (+0.35ppts y/y and +0.09ppts m/m). 
Bank deposits growth accelerated to 20.8% y/y and 3.5% m/m (exc. FX effect) to GEL 34.6bn (US$ 10.6bn) in December 2020. By currency GEL deposit growth accelerated to 41.3% y/y, while FX deposit growth slightly slowed to 9.3% y/y (exc. FX effect) and deposit dollarization reached 61.4% (-2.71ppts y/y and -0.57ppts m/m). 

Producer price index up 11.7% y/y in December 2020 
Annual PPI for industrial goods was up 11.7% in December 2020 from 10.0% in previous month, according to Geostat. Price changes in manufacturing (+11.5% y/y) contributed the most to the overall index change. 

NBG sold US$ 40mn 
On 27 January 2021, the NBG intervened on the FX market and sold US$ 40mn to support GEL. This was 2nd FX intervention YTD for a total sale of US$ 80mn through FX auctions.