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 regarding the duration of the ongoing conflict in the Middle East and the severity of global tariff policies. In the baseline scenario, in the short term, domestic demand is considered the leading factor of economic growth, while in the medium term, as the initial impact of tariffs diminishes, the normalization of external demand will be the main driver of growth. 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, along with the swift resolution of global trade flow problems, which will increase cargo turnover and reduce pressure on global food commodity prices. The adverse scenario encompasses the risks of tightening of trade and financial conditions due to the escalation of global tariff policy along with the conflict in the Middle East. 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.