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Nov 18, 2019

Monthly Update: November 2019

Monthly Update

The recovery in FX credit without excessive risk taking: key for the GEL and the growth

  • The external sector has weakened, though remains reasonably strong with tourism rebound, improved trade balance and higher remittances in October;
  • Fiscal to have less expansionary impact;
  • Business credit growth likely to normalize;
  • Mortgage growth has slowed further, however, the probability of lighter regulatory framework went up substantially;
  • Non-mortgage growth is bottoming out gradually;
  • Household Credit-to-GDP gap at constant exchange rate and Household debt service ratio at current exchange rate both have declined;
  • When taking FX risk with a GEL income stream, EUR/USD diversification appears to be an optimal solution – probably with a somewhat higher share of EUR for business borrowers;
  • The GEL remains undervalued, still being a concern for NBG, in our view;
  • Stronger FX credit and the GEL/USD will counteract negative impact of the tighter policy stance in GEL on the domestic demand;
  • The growth has slowed in Q3, though temporarily. 


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