research reports

Tourist arrivals to Georgia increased 5.9% y/y in January 2019.

Please see the full note here, which brings together tourist arrival data for reporting month, most recent statistical information available in the sector and 2019 forecast.

Highlights

• Real GDP growth in the US was revised down to an annualized 3.4% y/y (3rd estimate) from 3.5% y/y (2nd estimate) in 3Q18. Unemployment rate was 3.9% in December 2018, up from 3.7% in previous month.
• Economic growth came in at 1.8% y/y in Russia, 2.2% y/y in Georgia, 3.6% y/y in Armenia and 4.3% y/y in Kazakhstan in November 2018, based on rapid estimates. In 11M18, real GDP growth was 3.2% y/y in Belarus and 1.0% y/y in Azerbaijan. Ukrainian economy grew by 2.8% y/y in 3Q18.
• Annual inflation in the US was 1.9% in December 2018, down from 2.2% in previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was 1.6% in December 2018, down from 1.9% in November 2018.
• In December 2018, annual inflation was below the target level in Georgia (1.5%), Armenia (1.8%), and Belarus (5.6%); inflation was within the target range in Kazakhstan (5.3%), and above the target in Russia (4.3%), Ukraine (9.8%) and Turkey (20.3%). Annual inflation was 1.7% in Azerbaijan.
• Monetary policy rate was raised to 7.75% from 7.5% in Russia in December 2018 and has remained unchanged in other countries.
• Moody’s upgraded credit rating of Ukraine to Caa1 from Caa2 and changed the outlook to stable in December 2018.

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

GNERC approved natural gas tariffs for households for 2019. The tariffs were recalculated for three leading gas distribution companies accounting for 90% of the market in 2017: KazTransGas Tbilisi, Socar Georgia Gas and SakOrgGas. The household tariff combines three components: transmission, cost of gas, and distribution (which covers investment costs of the distribution licensee’s). Tariff methodology considers investment pipeline of 2019 and the difference between actual and forecasted investments of 2018. Based on GNERC calculations, the household tariffs for 2019 is 0.2% below the 2018 tariffs on average.

TPP tariffs revised for 2019 both for electricity generated and guaranteed capacity. Tariffs for electricity generated were significantly up for GPower (+17.7%) and for both blocks of GIEC (+10.9%). Tariffs for the other TPPs were increased by 2.5% on average. The guaranteed capacity fee was raised for Mtkvari Energy (+29.3%), GPower (+6.3%), Block 3 (+7.3%), and Block 4 (+7.1%) and remained at almost the same level for Gardabani CCGT (+0.02%).

Electricity consumption expected to increase by 10.9% in 2019. According to the electricity (capacity) forecast of 2019, approved by the Ministry of Economy in December 2018, the growth in consumption will be met by higher imports (+88.3% y/y) and hydro generation (+3.3% y/y). Main drivers for consumption growth are expected to be eligible consumers (+41.7%) and Energo-pro Georgia’s subscribers (+10.5% y/y). The forecast reflects the reallocation of 4 direct consumers from distribution licensee’s subscribers to the group of eligible consumers in May-2018, but does not foresee the expected drop in the eligibility threshold. Export of electricity is also expected to increase by 18.4% y/y in 2019. May, June and July are the only months with exports over the TDA amounts.

The number of players on wholesale energy market is expected to grow. According to the changes made into the law on Electricity and Natural gas on December 22, 2018: 1)The Government of Georgia is decision-maker for the direct consumer’s eligibility threshold. First GoG decree for this matter will be published in nearest future. 2)Power supply activity is allowed on wholesale energy market. Wholesale power suppliers will purchase electricity from power generating companies and sell it on wholesale market (e.g. to direct consumers). GNERC will have the right to monitor their activities, but the wholesale supply of electricity does not require special license. Notably, previous edition of law restricted trade of electricity on wholesale market for any company other than power producers. 3)Definition of guaranteed capacity sources includes all types of power plants, not only TPPs as in previous edition.

Highlights

• Real GDP growth in the US was an annualized 3.5% y/y (2nd estimate) in 3Q18. Unemployment rate was 3.7% in November 2018, unchanged from previous month.
• Real GDP growth in EU19 was revised down to 1.6% y/y in 3Q18, from initial estimate of 1.7% y/y. Unemployment rate in EU19 was unchanged at 8.1% in October 2018.
• Turkish economy grew by 1.6% y/y in 3Q18 and real GDP growth averaged 4.5% y/y in 9M18.
• Economic growth accelerated and came in at 6.7% y/y in Georgia, 5.2% y/y in Kazakhstan, 3.5% y/y in Russia and 3.0% y/y in Armenia in October 2018, based on rapid estimates. In 10M18, real GDP growth was 3.5% y/y in Belarus and 0.8% y/y in Azerbaijan.
• Annual inflation in the US was 2.2% in November 2018, down from 2.5% in previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was 2.0% in November 2018, down from 2.2% in October 2018.
• In November 2018, annual inflation was below the target level in Armenia (1.8%), Georgia (1.9%), Russia (3.8%) and Belarus (5.0%); inflation was within the target range in Kazakhstan (5.3%), and above the target in Ukraine (10.0%) and Turkey (21.6%).
• Monetary policy rate was raised to 7.75% from 7.5% in Russia as of 17 December 2018 and 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.