Problem Mortgage Loans Decline in Georgia

The export of IT technologies in Georgia has reached a record level, exceeding 2 billion lari. Experts consider tax incentives, enjoyed by companies with the "Virtual Zone Resident" status, as the primary factor driving the industry’s growth. Despite rising trends in the sector, challenges remain, the overcoming of which could accelerate its development in the country. Shorena Kopaleishvili, Chairperson of the Association of Georgian Virtual Zone Persons, discusses the current state of the IT sector, trends, and challenges.What has been the dynamics of IT technology exports in Georgia in recent years?– The export of IT services from Georgia has grown significantly in recent years. A particularly notable increase began in 2022. Looking at the dynamics of the last few years, it’s worth noting that export revenues quadrupled between 2021 and 2023, reaching 892 million USD in 2023, with a total turnover of 5.1 billion lari. Thanks to this rapid growth, the ICT sector took eighth place among the largest economic industries in 2023. However, in 2024, the income of Georgia’s IT sector decreased by approximately 12% compared to the previous year. This was due to objective reasons, as nearly all business sectors faced various challenges in 2024. Nevertheless, the first quarter results of 2025 exceeded all expectations: during this period, the sector’s external revenue reached 266 million USD, a 70% increase—or 110 million USD more—than the previous year. The primary market for Georgia’s IT service exports remains the United States of America.In your opinion, what has contributed to such growth in the sector?– The growth and development of the sector were initially supported by tax incentives. Since 2022, the growth rate accelerated due to the relocation of international companies and IT specialists to Georgia, prompted by the Russia-Ukraine war. Additional incentives include affordable internet costs, relatively low living expenses compared to other attractive locations, and the country’s favorable geographical position. Moreover, local companies are actively adapting to global trends, further enhancing Georgia’s investment appeal.In my view, tax incentives remain the key factor in the attractiveness of IT business in Georgia. Specifically, when considering the context of benefits for virtual zone companies. The "Virtual Zone Resident" status offers unique opportunities for IT companies operating on Georgian territory. This status provides significant tax advantages, fostering both the development of existing companies and the establishment of new businesses in the technological sector. Virtual zone residents are fully exempt from profit tax on income derived from IT services provided abroad. This benefit is particularly crucial for fast-growing tech companies, allowing them to direct all profits toward development and expansion. Exemption from value-added tax (VAT) is another significant advantage. Companies do not have to pay the 18% VAT on services provided to foreign clients, enabling them to offer more competitive prices on the international market.How many international IT companies are registered in Georgia today, and what has been the dynamics of their numbers in recent years?– As of July 1, 2025, 38,525 entities are registered in the information and communication technology sector, of which 24,265 are active. The number of medium and large companies is around 200, with the rest primarily consisting of foreign individual entrepreneurs, a trend linked to migration effects. The share of IT companies of foreign origin in this statistic is significantly higher than that of local companies, accounting for approximately 80%.Interest in conducting business in Georgia in this field continues to grow. The interest in the virtual zone status also remains strong. Between January and July 2025 alone, this status was granted to 28 legal entities, which is a positive and encouraging trend for the sector.Do challenges remain for international IT companies in Georgia, and if so, what problems do tech companies face?– Despite rapid growth and positive trends, IT companies operating in Georgia encounter various structural and operational challenges. In my opinion, several key factors can be highlighted:1. Deficit of Qualified PersonnelThere is a noticeable shortage of mid- and high-level specialists on the market, particularly in areas such as software engineering, cybersecurity, and DevOps.A trend of "talent drain" is observed: a portion of highly qualified professionals opts for careers and high-paying positions abroad.Most specialists live and work in urban centers, confirming that, despite the potential for remote work, the sector remains highly centralized.2. Limited Local Market SizeLocal demand for IT products and services is limited, increasing companies’ dependence on external markets.3. Challenges in the Education SystemEducational programs at universities and vocational institutions do not always meet the real needs of the market. The imbalance between formal education and the private sector’s requirements significantly reduces the quality of professional training.4. Technological InfrastructureAlthough internet infrastructure in Georgia is actively developing, regional coverage and reliability issues persist.5. Regulatory and Legal EnvironmentForeign investors and companies note that Georgian legislation is insufficiently predictable and stable, especially in the area of tax regulations.6. Political and Geopolitical FactorsRegional security challenges and the risk of political instability encourage investors to exercise greater caution.7. Competition on the Global MarketGeorgia’s IT sector must compete with strong regional and international hubs such as Ukraine, Poland, and the Baltic states, where the workforce is represented on a larger scale.What prospects do you see for this sector despite the challenges? Will it continue to grow in the coming years?– The outlook is promising. Georgia’s IT sector is at a pivotal stage of development. The growing potential of its workforce, close collaboration with international partners, and the trend toward integration into global markets create a solid foundation for the country’s technological progress. With the right state policies, education reforms, and strengthening of business infrastructure, the sector can not only solidify its position in the region but also become a significant innovation hub.

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Refinancing loans decreased by 150 million in August and the balance as of September 1 was 3.8 billion GEL. One-month loans amounted to 2,000 billion GEL.In July, GEL 40.0 million worth of certificates of deposit were placed and GEL 20.0 million worth of certificates of deposit were redeemed during the same period.No transactions were recorded on the secondary market. No one purchased treasury securities.

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In detail:• The residential segment index increased by 1.6 percent compared to the previous month and by 7.8 percent compared to the same month of the previous year;• The non-residential segment index decreased by 3.0 percent compared to the previous month and increased by 6.7 percent compared to the same month of the previous year;• The civil segment index increased by 0.5 percent compared to the previous month and by 3 percent compared to the same month of the previous year.In July 2025 the Construction Cost Index (CCI) increased by 0.4 percent compared to the previous month. The change was mainly due to a 4.5 percent increase in average monthly nominal wages of employees in the construction sector, which contributed 0.73 percentage points to the total index change.Compared to July 2024 the CCI increased by 5.6 percent. The latter was largely caused by the 22.5 percent increase in average monthly nominal wages of employees in the construction sector and by the 1.5 percent increase in the prices of construction materials, which contributed 4.53 and 0.92 percentage points to the total index change, respectively. Along with this, the Construction Cost Index posted a 25.0 percent increase compared to February 2022.

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The majority of grievances, more than 2,000 cases (around 70%), concern issues related to current account conditions, service errors, and problems with card delivery and maintenance.The second-largest category of complaints involves commissions and penalty rates, with 1,936 complaints submitted against banks and microbanks.On the other hand, some products remain almost problem-free. For example, only 2 complaints were filed regarding savings deposits, while no complaints were recorded for term deposits or repair loans. The Credit Information Bureau also received just 4 complaints.Service-related complaints (majority of cases):

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After the regulations adopted between 2018-2019, large-scale problems with these loans are no longer observed. The regulations, with a campaign to combat over indebtedness, supposedly served to protect consumers, have yielded results. Fewer people from small and medium incomes have access to loans.The volume of deposits in the bank portfolio has increased, to 516.4 million GEL (01.08.2024 - 422. million GEL).

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The increase was observed in the production value of the business sector as well. In the II quarter of 2025, production value equaled 23.2 billion GEL, which is 13.0 percent more year-on-year.In the II quarter of 2025, large businesses generated 68.1 percent of total turnover, while medium size businesses generated 14.9 percent, and 17.0 percent was generated by small business. A distribution was different in case of total production value: 46.8 percent was on large businesses, 24.1 percent — on medium, and 29.1 percent — on small businesses.In the II quarter of 2025, total purchases of goods and services carried out by enterprises equaled 31.0 billion GEL (year-on-year 9.3 percent more), while the purchase of goods and services for resale amounted to 17.8 billion GEL (year-on-year 4.6 percent more).In the II quarter of 2025, the average number of persons employed in business sector equaled 795.6 thousand, which is year-on-year 3.3 percent more. Out of the total number of persons employed, 44.1 percent were female and 55.9 percent were male.Large businesses employed 42.9 percent of total number of persons, while 20.4 percent were employed by medium, and 36.7 percent — by small businesses.The total number of employees amounted to 745.3 thousand (year-on-year 2.9 percent more) and the total personnel costs of enterprises equaled 5 284.0 million GEL (year-on-year 13.5 percent more).In the II quarter of 2025, average monthly remuneration of employed persons equaled 2 317.6 GEL (212.2 GEL increase year-on-year) while remuneration specifically for employed women was 1 783.5 GEL (147.2 GEL increase year-on-year). Average monthly remuneration of employed persons by size of enterprises is as follows: Large business — 2 466.9 GEL Medium size business — 2 741.8 GEL Small business — 1 823.3 GEL

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According to the survey results, 87.9% of the population aged 6 years and older has used the internet within the last 3 months, an increase of 3.2 percentage points compared to the previous year. The percentage of this indicator equals to 91.6 % in urban and 81.8% in rural areas. This indicator is 88.2% for women and 87.6% for men. Among different age groups, the indicator is highest in the 15-29 age group, at 99%.Among the population aged 15 years and older who have used the internet within the last 3 months, 95.4% use the internet every day or almost every day, 4.3% use it at least once a week (but not every day), and 0.4% use it less frequently (less than once a week).According to the survey results, among the population aged 15 years and older who used internet within the last 3 months, the main reasons for internet use are: telephoning over the internet/video calls over the internet (97.2%), participating in social networks (96.0%), internet banking (55.7%), seeking health-related information (52.1%), finding information about goods and services (47.7%), reading online news/newspapers/magazines (45.3%), sending/receiving e-mails (38.5%), downloading software or applications (other than games software) (13.7%) and looking for a job or sending/submitting a job application (11.0%).Among the population aged 15 years and older who have used internet within the last 12 months, 37.4% have purchased or ordered goods or services. This figure varies by type of settlement: 43.4% in urban areas and 26.1% in rural areas. By gender, the values are 41% for women and 33.3% for men. The figures also vary by age groups: 61.1% for those aged 15-29, 38.3% for those aged 30-59, and 15.3% for 60 years and older.Among internet users aged 15 years and older who have used the internet within the last 3 months, 99.5 percent have used a mobile device (mobile phone, laptop, tablet, etc.) to connect to the wireless Internet. This indicator is 99.6 percent for women and 99.5 percent for men.According to the survey results, 58.8 percent of households have a computer. This indicator is 67.2% in urban areas and 47.2% in rural areas. Among the regions, the highest values are observed in Tbilisi and Adjara, at 70.9% and 69%, respectively.Among the population aged 6 years and older, 49.5 percent have used a computer in the last 3 months. The indicator varies by type of settlement, with 58.2% in urban and 34.9 % in rural areas. By gender, the indicator is 49.5% for women and 49.4% for men. Among age groups, the highest share of computer users is found in the 6-14 age group, at 87.6%.Among the population aged 15 years and older who used computer within the last 3 months, 71.4% use a computer every day or almost every day, 19.9% use it at least once a week and 8.7% use it less frequently (less than once a week).According to the survey results, 92.7 percent of the population aged 6 years and older own a mobile phone, an increase of 1.9 percentage points from the previous year. This indicator increased by 1.5 percentage points in urban and by 2.4 percentage points in rural areas, reaching 94.8% and 89.1%, respectively.

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With regard to the annual core inflation, the prices increased by 3%, while the annual core inflation without tobacco amounted to 2.8%.The annual inflation rate was mainly influenced by price changes for the following groups:Food and non-alcoholic beverages: the prices in the group increased by 10.0 percent, contributing 3.35 percentage points to the overall annual inflation rate. Within the group the prices increased for the followingsubgroups: fruit and grapes (15.3 percent), oils and fats (14.8 percent), coffee, tea and cocoa (13.1 percent), milk, cheese and eggs (11.8 percent), fish (10.8 percent), vegetables (10.8 percent), sugar, jam, honey, chocolate and confectionery (10.2 percent), bread and cereals (9.4 percent), mineral waters, soft drinks, fruit and vegetable juices (8.4 percent), meat (3.2 percent);Health: the prices increased by 9.3 percent, contributing 0.78 percentage points to the overall index. The prices were higher for the following subgroups: out-patient services (10.8 percent), hospital services (9.2 percent), medical products, appliances and equipment (7.9 percent);Alcoholic beverages and tobacco: the prices increased by 4.7 percent, with the relevant contribution of 0.3 percentage points to the overall annual inflation rate. The prices increased for both tobacco (5.5 percent) and alcoholic beverages (4.0 percent);Transport: the prices for the group decreased by 2.4 percent, contributing -0.31 percentage points to the overall index. Within the group the prices decreased for operation of personal transport equipment (-3.9 percent). At the same time, prices increased for purchase of vehicles (0.5 percent) and transport services (0.3 percent).

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