BAKU, Azerbaijan, Nov.2
By Tamilla Mammadova – Trend:
Economic recovery continued strengthening since June 2020, supported by fiscal policy, bank lending and strong growth in remittances in Georgia, Trend reports via the Georgian Galt & Taggart investment company.
"However, rapid growth of COVID-19 cases puts downward pressure on recovery dynamics, despite low probability of the re-imposition of strict lockdown measures," the report said.
As reported, annual inflation retreated gradually since the start of the year, reaching 3.8 percent in September 2020. The National Bank of Georgia (NBG) cut the key rate three times this year to 8 percent.
However, further rate cut was limited by lari’s weakness in September, which is also major step-back for the real estate industry. Consumer expectations also worsened somewhat in September amid lari weakness. While Consumer Confidence Index (CCI) was up by a significant 14.9 index points in September 2020, compared to April 2020, it worsened compared to August 2020.
In 3Q2020, mortgage issuance spiked sharply amid subsidy scheme and recovering economy.
Reduced mortgages in 2Q2020 was driven by lockdown accompanying by sharply increasing interest rates as markets priced in increased risks. Importantly, economic stabilization signs and government subsidy scheme drove lari interest rates down in 3Q2020 to 11.2 percent (-2.2 ppts vs 2Q2020), while FX interest rates was slightly up to 5.7 percent (+0.5 ppts vs 2Q2020).
Issuance of new mortgages sharply increased in September 2020 to 437 million lari ($135.5 milllion) after minor increase in August 2020 and reduction in July 2020. In September, lari denominated loans accounted for 62 percent of total, and FX denominated loans also increased strongly.
"We expect demand on mortgages to be supported in 4Q2020 by government’s 4 percent interest rate subsidy scheme, which expires at end 2020 on the one hand. On the other hand, demand may be hampered by rising COVID-19 cases and lari depreciation. Notably, share of mortgage-financed apartment sales jumped to 44 percent - highest since mortgage regulations became effective in January 2019 (23 percent in 2Q2020 and 31 percent in 3Q2019)," the company said.
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