The National bank of Georgia publishes the new issue of macroeconomic forecast scenarios for the purpose of an International Financial Reporting Standard IFRS 9.

The scenarios are intended for promoting transparent, consistent, and efficient financial reporting in financial institutions. The current update of the scenarios is published several months earlier than usual in order to provide the financial institutions in a timely manner with forward-looking macroeconomic information in the face of deteriorated economic conditions and increased uncertainty caused by the COVID-19 pandemic.

In the current issue of the scenarios, the main drivers of the encompassing macroeconomic variables are the possible development path of the COVID-19 pandemic and the speed of vaccination. The baseline scenario considers economic recovery starting from 2021 due to vaccination, lower infection rates and gradual relaxation of the containment measures. According to the upside scenario, the economic recovery starting from 2021 is faster compared to the baseline. This is achieved thanks to greater global and domestic availability of vaccines and improved market sentiment. The adverse scenario assumes that the vaccination process will be disrupted and a high rate of the virus spread will remain throughout 2021. This will result in a prolonged recession and the economic recovery will be delayed till the second half of 2022. The current forecast horizon is distinguished by more than usual uncertainty and elevated risks.

According to IFRS 9, forward-looking information is essential for credit risk assessment. In particular, expected developments in macroeconomic and financial environment as well as domestic and external risks should be accounted for when assessing expected credit losses. This will facilitate timely recognition of credit risk, and therefore contribute positively to financial stability.

In addition, it is important that the macroeconomic assumptions used by different financial institutions are comparable. This can be accomplished by utilizing the published macroeconomic scenarios.