Page 30 - GEORptMar19

four-quarter GDP, calculated at the end of June) at the end of August, up from 55.3% one year earlier. The robust GDP growth, at over 5% y/y in the past three quarters ending June 2018, contributed to higher investor confidence.
The stock of loans has increased by real rates of over 15% y/y for the past six months. But on a broader perspective, the growth rates are far from the record performances seen in 2015. After the lending decelerated abruptly in 2016 amid weak economic growth in 2015 and 2016, the banks have gradually recovered to deliver outstanding performances in 2017 and 2018.
Amid an upward stage in the economic cycle, lending gained momentum particularly this year while the quality of banks’ portfolios improved. Nonetheless, the central bank has urged lenders to not slacken when it comes to financial discipline since such an improvement in credit quality is typical for this stage of the economic cycle (while hiding potential threats). In fact, new, tighter regulations were enforced.
The stock of loans was pushed up as of the end of August by mortgage lending to households, with that accounting for a significant share of total loans: 32.7% at the end of August up from 29.3% one year earlier. In nominal terms, the stock of mortgage loans to households increased by 36.8% y/y (33.8% y/y real terms), well above the average.
A high growth rate was posted by the transport and communication sector. It saw growth of 84.6% y/y (nominal terms), and went from 1.5% of total loans one year earlier to 2.2% at the end of August. The stock of loans to industry accounted for 11% of total loans after having increased by 22.7% y/y.
8.1.3 NPLs
Georgian banks have weathered the depreciation well, with non-performing loans (NPLs) at a manageable rate of 2.8% of total loan portfolio at end-2017 , compared with a ratio of 3.4% at end-2016, according to the National Bank of Georgia. NPLs account for around 3% of total lending. Banks are well capitalised and positioned to absorb a moderate deterioration in their loan portfolios, according to Fitch ratings agency.
30 GEORGIA Country Report March 2019 www.intellinews.com