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Georgian Weekly Market Watch

NPLs at 2.4% in June 2018
In June 2018, the banking sector loan portfolio increased 18.4% y/y after growing 18.6% y/y in previous month, excluding the exchange rate effect. In unadjusted terms, loan portfolio was up 19.8% y/y and up 1.0% m/m to GEL 23.1bn (US$ 9.4bn). Deposits were up 19.2% y/y excluding the exchange rate effect. In unadjusted terms, deposits were up 20.4% y/y and up 1.2% m/m to GEL 20.3bn (US$ 8.3bn). Deposit dollarization declined to 60.8% (-6.8ppts y/y and -1.5ppts m/m). NPLs stood at 2.4% in June 2018 (-1.1ppts y/y and -0.2ppts m/m).

NBG reduced the monetary policy rate by 0.25ppts to 7.0%
At its meeting on 25 July 2018, NBG’s monetary policy committee decided to reduce its key rate by 0.25ppts to7.0%. Inflation was 2.2% in June, below the 3.0% target. The policy rate cut was mainly due to the reduced inflationary pressure stemming from higher than expected appreciation of the nominal exchange rate. The committee also decided to increase the minimum reserve requirements on short-term foreign currency funding from 20.0% to 25.0%.The next committee meeting is scheduled for 5 September 2018.

NBG continues to build reserves
On July 27, 2018, the NBG intervened on the FX market and purchased US$ 10mn to curb GEL’s appreciation. YTD, the NBG purchased US$ 70mn and GEL strengthened 5.5% against USD.