Page 41 - GEORptFeb22

only a limited portion have become impaired, noted Fitch.
The Covid-19 crisis has negatively affected the performance of EBRD's loan book, the ratings agency also said, adding: “The bank's reported NPL ratio improved to 5.4% at end-June 2021 from 6.1% a year prior but remains above the pre-pandemic five-year average of 4.9%.
8.2 Central Bank policy rate
Georgia’s central bank keeps refinancing rate at 10.5%
On February 2, in line with analysts’ expectations, the National Bank of Georgia (NBG) decided to keep the refinancing rate unchanged at 10.5%. Aside from fighting expectations for persistent inflation, the decision on keeping the hawkish policy rate (the highest in 13 years) was explained by the geopolitical tensions as well as the faster-than-expected tightening of global financial conditions.
The monetary policy will keep a tightening bias until the risks of rising inflationary expectations are sufficiently mitigated, NMG said in a statement. In December, the annual inflation rate rose to 13.9% y/y. Since the first half of 2021, high inflation has been driven by globally rising prices for food, oil and shipping.
However, It should be noted that the recent strengthening of the local currency in nominal effective terms has somewhat eased the pressure of the imported inflation.
In addition, both core and monthly inflation in recent months have shown early signs of stabilization, the NBG says.
According to the current forecast, other things being equal, inflation will start to decline gradually from spring of this year and will approach the target by the end of the year. Tighter monetary policy, along with the fading out of one-off factors and fiscal consolidation, is expected to contribute to this reduction in inflation.
The monetary policy committee of the NBG on December 8 increased the refinancing rate by 0.5 pp to 10.5%, in the fourth rate hike in 2021. Loose fiscal policy, imported inflation and aggregate demand have all contributed to the persistent double-digit inflation.
41 GEORGIA Country Report February 2022 www.intellinews.com