The National Bank of Georgia publishes the new issue of macroeconomic 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 serves to provide the financial institutions in a timely manner with forward-looking macroeconomic information in the face of uncertainty related to the ongoing regional and international geopolitical events.

In the current issue of the scenarios, the main drivers of the encompassing macroeconomic variables are the assumptions related to the duration of the ongoing regional conflicts worldwide, along with the globally tightened financial conditions. In the baseline scenario, the leading drivers of economic growth include increased domestic and external demands stemming from accelerated credit activity and enhanced service sector productivity. According to the upside scenario, economic activity is more sustainable compared to the baseline scenario, which is related to the expansion of the country's transit potential and the reduction of global inflationary pressures on food products due to a quicker resolutions to regional conflicts. The adverse scenario encompasses fundamental changes in the global markets due to the escalation of regional conflicts around the world and the global tightening of trade and financial conditions. It should be noted that uncertainty and risks regarding the future period are elevated.

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. The risk scenarios presented in the document do not represent the forecast of the National Bank of Georgia, and their publication serves to ensure transparent and efficient implementation of IFRS 9 by financial institutions.

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.