Economic

Outlook and Indicators

Issue #15www.pmcg-i.com

25.12.2013

In October 2013, the volume of deposits increased (22.6%) in comparison with the indicator of October 2012. In this period the volume of deposits denominated in GEL as well as in foreign curren-cy increased (41.2%; 12.5%). The share of deposits denominated in foreign currency (59.4%) still exceeds to the share of deposits denominated in GEL (40.6%), but it is 5.4 percentage points lower than the indicator of October 2012 (64.8%). This points to the increase of the level of larization, which on its turn is a significant determinant for the implementa-tion of the effective Monetary Policy and its effect on economy. In October 2013, the weighted average interest rate on deposits is 6%, which is 2.1 percentage points lower than the corresponding indicator in October 2012. This change can be explained by the re-duction of the monetary policy interest rate (-2 percentage point) and increase of the volume of deposits (22.6%).

In October 2013, the volume of the loans to the national econ-omy increased (12.6%) compared to October 2012. The share of the loans to both, legal entities as well as to individuals increased ( 4.2%; 23.6%). In October 2013, the highest shares of the loans to National econ-omy are for Trade (48%), Industry (17%) and Construction (8%) sectors. The share of consumer loans in total loans to individuals is 35.4% and the share of the loans secured by the real estate in total loans to individuals is 42.6%. In October 2013, the weighted average interest rate on loans is 17.7% , which is 1 percentage point lower than the indicator of October 2012. The interest rate on National currency denominated loans reduced by 2 percentage points and equals 19.9% and on for-eign currency denominated loans reduced by 0.8 percentage point and equals 13.7%.

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NPLs Share of NPLs in total loans

The share of the non-performing loans in total loans is an im-portant indicator for determining the quality of the loan portfolio. In October 2013, the volume of NPLs increased (6.3%) compared to the indicator of October 2012. The volume of total loans aslo increased (12%). Thus, the share of NPL in total loans (9.4%) de-creased by 0.5 percentage point (8.9%). In October 2013, 48.9% of non-performing loans is covered by the special reserves. At the end of October 2013 the comercial banks had profit (33.9 mln.GEL).

This issue of “Economic Outlook and Indicators” analyzes the banking sector in the period of January-October 2013. In October 2013 the volume of deposits, as well as the volume of loans to the National economy increased ( 22.6%; 12.6%) in comparison with the indicators of the corresponding period in 2012. The share of deposits nominated in foreign currency de-creased (- 5.4 percentage points), thus the indicator of dolarization has also decreased correspondingly (-5.4 percentage points). In this period, the weighted average interest rate on deposits was 6% and on loans was 17.7%. In December 2013, GEL depreciated against USD (2.8%) as well as against Euro (7.4%) compared to the indicator of December 2012.

Contact Information

-2-

Source: National Statistics Office of Georgia, Ministry of Finance of Georgia, National Bank of Georgia

*projected

PMCG Research

Tamar Jugheli

E-mail: research@pmcg.geE-mail: t.jugheli@pmcg.geT: (+995) 2 921171

www.pmcg-i.com

Economic

Outlook and Indicators

Issue #15www.pmcg-i.com

EEBanking Sector M25.12.2013

Basic Economic Indicators I12 II12 III12 IV12 2012 I 13* II 13* III 13*

Nominal GDP in current prices (mln USD) 3388.3 3918.3 4156.1 4367.6 15 846.8 3487.6 3958.4 4120.3

Per capita GDP (USD) 753.4 871.2 924.1 971.1 3 523.4 777.8 882.8 918.9

GDP real growth, percent 6.70% 8.20% 7.50% 2.80% 6.2% 2.40% 1.5% 1.4%

Consumer Price Index 99.1

Foreign Direct Investment (USD) 269.4 219.4 195.4 181 911.6 226.2 232.4 238.7

Unemployment Rate - - - 15%

External Public Debt (mln USD) - - - 4357.1

Poverty Level - - - 9.7%

The exchange rate of GEL against USD as well as against Euro is depreciating since May 2013. In December 2013, GEL depreciated against USD in comparison with November 2013 (1.7%), as well as in comparison with December 2012 (2.8%). In December, 2013 GEL depreciated against Euro in comparison with November 2013 (3.1%), as well as in comparison with December 2012 (7.4%). The depreciation of GEL will lead the increase of the prices of imported goods, as well as the price of loans in foreign currency.

The National Bank of Georgia regulates the ex-change rate by buying and selling the reserves of for-eign currency.

In November 2013, in order to stop the process of depreciation of GEL, NBG sold 80 mln USD reserves. Consequently, the share of foreign currency reserves in total reserve assets is 93%, which is lower (-2.7%) in comparison with the indicator of October 2013, but exceeds (6.9%) the indicator of November 2012.

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