The financial sector remains resilient and continues smooth lending to the economy. As of May 2024, banks maintain healthy capital and liquidity indicators. In May 2024, annual credit growth accelerated compared to the previous period and, excluding the exchange rate effect, amounted to 19%, which is mainly driven by the growth in business loans. However, the growth dynamics of unsecured consumer loans, which is outpacing the general tendency of credit activity, is noteworthy. It is worth mentioning that the acceleration of consumer loan growth in the past months was partially due to the base effect from the change in the maturity limit. The National Bank will continue monitoring the market dynamics and, depending on the circumstances, will make further decisions.

The Financial Stability Committee of the NBG decided to leave the cyclical component of the countercyclical capital buffer unchanged. As of the first quarter of 2024, Credit-to-GDP ratio remains below its long-term trend. The current dynamics were caused by the Credit-to-GDP ratio staying at around the same level as the previous quarter, reflecting the seasonally low credit activity in the first quarter of the year, along with the significant growth in the gross domestic product. According to the Committee’s assessment, if the existing tendency of credit activity continues, alongside the gradual normalization of economic growth, the negative Credit-to-GDP gap will close this year. Therefore, there is no need to change the cyclical component of the countercyclical capital buffer.

Source: NBG; Geostat

* Nominal GDP growth reflects the YoY GDP growth of the last 4 quarters. 

** Credit includes loans directly issued by commercial banks, microfinance institutions and loan issuing entities as well as bonds issued domestically by the non-financial sector.

*** Credit-to-GDP gap is the deviation of Credit-to-GDP ratio from its long-run trend. The trend is estimated using HP filter in line with the Basel recommendations

The National Bank of Georgia continues monitoring the country's financial stability and assessing domestic and foreign risks. If necessary, it will use all available instruments to minimize the possible risks.

 

The Financial Stability Committee's next meeting will be held on September 25, 2024.