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Georgia sees increase in deposits denominated in foreign currency

Finance Materials 28 April 2021 14:18 (UTC +04:00)

BAKU, Azerbaijan, April 28

By Tamilla Mammadova – Trend:

Georgian monetary policy remained moderately accommodative to support the economy, Trend reports via the Asian Development Bank (ADB) Outlook 2021.

As reported, the National Bank of Georgia, cut its policy rate by a cumulative 100 basis points to 8 percent during 2020.

"Broad money growth accelerated from 16.7 percent in 2019 to 23.3 percent as private credit expanded by 21 percent. The percentage of nonperforming loans rose slightly from 1.9 percent in 2019 to 2.3 percent but may rise further in 2021 when a temporary moratorium on loan repayment is lifted," the report said.

The percentage of deposits denominated in foreign currency rose from 61 percent in 2019 to 62.7 percent in 2020, and of loans from 54.6 percent to 55.1 percent. The market interest rate for loans remained largely unchanged in 2020 at 12.2 percent and for deposits at 6.8 percent, while bank returns on assets and equity languished near zero.

The current account deficit more than doubled from the equivalent of 5.5 percent in 2019 to 12.3 percent as COVID-19 cut tourism and triggered a recession in Georgia’s trade partners.

"Merchandise exports fell by 12.3 percent while declining domestic demand cut merchandise imports by 13.8 percent. Service exports tumbled by 65.5 percent as international arrivals plunged by more than 80 percent and revenue from tourism by 90 percent. Remittances grew by 8.8 percent, however, as higher inflows from Greece, Italy, Turkey, and the US offset lower remittances from the Russian Federation," the report said.

Despite foreign direct investment falling by over half and extensive central bank sales of foreign exchange to support the lari, gross international reserves climbed from $3.5 billion at the end of 2019 to $3.9 billion a year later on expanded inflow from development partners, notably through an International Monetary Fund support program.

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