GE EN
Finance
Rakviashvili does not believe in managing the NBG's expectationsv

Because (Koba Gvenetadze replied to Sandro and Roman) that the long-term inflation benchmark (target indicator) should reflect the change in prices that is caused by the structural characteristics of the economy, and not by a one-time factor, albeit a long-term one.The starting point is the difference in productivity growth rates in tradable and non-tradable sectors. The tradeable sector is 1.5% higher than the non-traded sector. Accordingly, wages in the trade sector are growing faster. This increases the ambition of employees in the non-tradable sector as well. Where due to lack of productivity, the employer has to increase wages at the expense of increasing the price of the product. This causes inflation in the mentioned sector.In contrast to our country, the balance is preserved in developed countries. Non-tradable equals tradable. Inflation is targeted at 2% as a result of the global impact of tradable prices. The ratio is somewhat similar to Georgia, but since it is up to 3.5% in non-traded areas, the average is 3%.According to Gvenetadze, the target of 3% is optimal for 2 main reasons. It minimizes costs caused by inflation. Low enough to have a long-term negative impact on the population. At the same time, it leaves the possibility that the optimal relative prices in the economy do not interfere with the efficient allocation of resources."Our goal is not to control the money supply, our goal is to have the interest rate close to the monetary policy rate", - Aleksande Rakviashvili does not believe in the answer of the NBG’s governor, as well as the inflated prices due to the cost of transportation, increased inflation and expectations managed by the Central Bank."The management of expectations plays a big role", - Koba Gvenetadze called the example of 2017, which was continuously increased by the increase of excise duty, in 2017. How did inflation rise to 6.7% in 2017, then how did it come down to 1.5%.According to him, there is an international container index (according to Rakviashvili it does not exist), which has increased 5 times and finally the cost of transportation made the product more expensive.In response to Rakviashvili's question, "Inflation ran away from you in 2019", the president of NBG repeated many times that it was due to the blocking of air traffic by Russia at the beginning of the tourist season. Then it was transmitted to the market through the channel of expectations, and indeed, with high inflation, Georgia was an exception.Rakviashvili was not satisfied with the establishment of facts. As he said, he cannot intuitively believe the NBG's conclusions without serious arguments.

1669742365

Inflation decrease is determined by the spending policy of migrants

The NBG Governor answered the parliamentarians about the expectations of a significant decrease in inflation. What factors give the NBG hope that inflation will approach the target next year? Among these factors is the tightening of monetary policy, which will be maintained until expectations are reduced.Koba Gvenetadze said that analysis of current data is more important than forecasts, which is not justified in many countries under the conditions of uncertainty, on the basis of which macroprudential measures are taken.NBG Governor stated the importance of regulations in the individual cases when the MP change is ineffective and cannot curb inflation.Koba Gvenetadze said about the prudent policy of NBG. It was ahead of other countries in implementing macroprudential measures.He spoke about measures to limit lending, among which was the shortening of foreign currency mortgages and consumer loans. Decreasing the reserve requirement in GEL, which increases the cost of raising currency.“I am proud to say that this flexible basket was not available until 2016, which allows for recalibration along with calibration. That is, if it is tightened too much, it will be eased (periodically changing the parameters).Exogenous factors account for 6% of inflation (10.6%) (including the cost of transportation, which has a decreasing trend and will gradually be transferred to Georgia as well). These factors include 0.5% - the impact of the rent price, which is related to migration. This helps the economic growth of the country. At the same time, it increases aggregate demand, which has a negative effect on domestic inflation. In response, the NBG maintains a stricter policy.The strengthening of the exchange rate helps the imported inflation. At the same time, it increases aggregate demand, which has a negative effect on local inflation”, - the NBG Governor said.

1669741654

NBG Governor Gives Great Importance To The Existence Of An Independent...

"It should be noted that in the case of a country with a small open economy like Georgia, which is not integrated with any economy with a stable monetary policy, the existence of an independent monetary policy is important. At the same time, free capital mobility is essential for long-term economic growth. These two conditions require the existence of a floating exchange rate regime. The exchange rate performs the function of absorbing shocks, to the extent that, in the event of an external shock, the change in the exchange rate maintains the country's competitiveness and in this way weakens the impact of the said shock on economic growth and inflation. Of course, diversifying our trade more will be important to reduce inflation. I would also like to emphasize the agreement reached between the Georgian authorities and the IMF mission regarding the Stand-By Arrangement for Georgia. The IMF mission notes in a recent press release: “We welcome the government's continued commitment to an inflation targeting framework, a floating exchange rate, and prudent management of reserves. The National Bank of Georgia properly maintained the flexibility of the exchange rate and accumulated international reserves, took advantage of the favorable conditions created by the increase in foreign inflows this year, and continued foreign exchange interventions with the instruments of standard interventions of central banks. In order to maintain the downward trend of inflation, it is necessary to maintain a fairly strict monetary policy," said Koba Gvenetadze.

1669661349

The volume of loans issued by banks increased slightly

As of the document, the volume of loans in national currency increased by 261.19 million GEL (1.11%) and the volume of loans in foreign currency decreased by 243.77 million GEL or by 1.24% in the same period (exchange rate effect excluded, decreased by 0.12%).By the end of October 2022, the total volume of national currency denominated loans to resident legal entities issued by commercial banks amounted to 7.27 billion GEL (1.41% more compared to the previous month), and foreign currency denominated loans constituted 12.07 billion GEL (1.56% less; exchange rate effect excluded volume of lending in foreign currency decreased by 0.44%). During October 2022, the volume of lending to resident household sector increased by 0.38% or 87.37 million GEL, and constituted 23.07 billion GEL by November 1, 2022. Larization ratio for total loans constituted 55.17 percent by November 1, 2022 and increased by 0.58 percentage point (exchange rate effect excluded, increased by 0.30 percentage point), compared to October 1, 2022.

1669661241

In October, the growth rate of deposits exceeded loans

As of the document, in October, the volume of term deposits decreased by 243.06 million GEL (by 1.47%; exchange rate effect excluded volume of term deposits decreased by 0.60%). Demand deposits increased by 486.53 million GEL (by 1.90%; exchange rate effect excluded volume of demand deposits increased 2.91%).The total volume of non-bank deposits in the country′ s banking sector increased by 0.58% or by 243.46 million GEL (exchange rate effect excluded volume of deposits increased by 1.53%), compared to October 1, 2022 and constituted 42.31 billion GEL by November 1, 2022. In October, the volume of term deposits decreased by 243.06 million GEL (by 1.47%; exchange rate effect excluded volume of term deposits decreased by 0.60%). Demand deposits increased by 486.53 million GEL (by 1.90%; exchange rate effect excluded volume of demand deposits increased 2.91%). The larization ratio of total non-bank deposits constituted 42.70% by November 1, 2022 and decreased by 0.29 percentage point (exchange rate effect excluded by 0.69 percentage point) compared to October 1, 2022. The market interest rate on term deposits constituted 7.74%. In particular, the market interest rate for national currency denominated deposits was 11.31% and the market interest rate for foreign currency denominated deposits was 0.96%. The share of the US dollar in the total volume of foreign currency denominated deposits equals 82.09% and the share of the Euro equals 16.22%.

1669661065

Price of Georgian companies on the LSE increased sharply within a mont...

TBC Bank Group (TBCG LN) closed the week at GBP 21.80/share (unchanged w/w and +14.26% m/m). More than 497k shares changed hands in the range of GBP 19.66 - 22.70/share. Average daily traded volume was 76k in the last 4 weeks. The volume of TBCG shares traded was at 0.90% of its capitalization.Georgia Capital (CGEO LN) shares closed at GBP 7.44/share (-0.13% w/w and +20.39% m/m). More than 193k shares traded in the range of GBP 7.40 - 7.68/share. Average daily traded volume was 55k in the last 4 weeks. The volume of CGEO shares traded was at 0.42% of its capitalization.

1669660968

Price Of Georgian Corporate Eurobonds Changed In Different Directions

Bank of Georgia Group Eurobonds (GEBGG) closed at 5.26% yield, trading at 100.50 (-0.04% w/w).Georgia Capital Eurobonds (GEOCAP) were trading at 94.79 (+0.53% w/w), yielding 10.58%.Georgian Railway Eurobonds (GRAIL) traded at 80.37 (+0.52% w/w), yielding 8.51%.Georgian Sovereign Eurobonds (GEORG) closed at 88.67 (+1.13% w/w) at 6.52% yield to maturity

1669660835

More than 60% of deposits are in foreign currency – Banks’ Rating

The share of USD in foreign currency deposits was 82.09%, and the share of EUR was 16.2% (L/Y - 83.3%; 15.3%). Deposit ratio increased to 42.7% (L/Y - 39.2%).According to the NBG, deposits increased by 243 million in October (+0.58%m.m). However, term deposits decreased by the same amount (-243 million m.m).In October, the average annual weighted market interest rate on term-deposits was 7.74%, including 11.3% on deposits in national currency and 0.96% on deposits in foreign currency. (01.22.2021 - 5.8%; 10.6%: 0.8%). Banks with non-bank deposits (000 GEL) and paid %:

1669396037

Banks’ Profit exceeds 1.8 BLN

Last year, over 10 months, 1 bank had at a loss. Sanctioned VTB was positioned among TOP-4 profitable banks. As of November 1, this year, the loss of the subsidiary of the Russian bank exceeds 70 million GEL.As of November 1 (01.11.2022), 11 banks have a profit, with a total volume of GEL 1.85 billion and 93.9% is the share of 5 banks.Profitable Banks 

1669395945

1 out of 17 Credo loans is problematic

According to the NBG, unlike the pandemic, the war crisis did not affect Georgia. Even during the pandemic, the volume of non-performing loans did not reach the assumed 10%. It was only increased to 8.5% and started to decrease from Q2/2021.Russia's war against Ukraine did not have a negative impact on the Georgian banking sector. The risks did not materialize. On the contrary, migration encouraged economic growth.Banks by Problem Loans 

1669395774