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 duration of the Russia-Ukraine war and globally tightened financial conditions.

In the current issue of the scenarios, the main drivers of the encompassing macroeconomic variables are the assumptions related to the economic activity in Georgia's trading partner countries and the duration of the Russia-Ukraine war. In the baseline scenario the main drivers of economic recovery include a rise in domestic demand due to increased  migration, and an improvement of investment dynamics. According to the upside scenario, the economic activity is more sustainable than the baseline scenario, which is related to the expansion of the country's transit potential and the expectations of higher economic growth in trading partners. The adverse scenario encompasses the prolongation of tighter financial conditions in developed countries and the risks of a possible recession in trading partner countries. The time horizon of scenarios is characterized by high 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. 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.