Georgian Weekly Digest 8 May 2017

Economy

The National Bank of Georgia (NBG) increased its policy rate by 25 basis points to 7.00%.

The NBG expects inflation to overshoot its target for 2017 of 4% due to supply side factors and to approach the 2018 target of 3% once the one-off factors are exhausted. Therefore, in order to reduce inflation expectations NBG decided to increase its policy rate. All else being equal, the central bank does not forecast further tightening in 2017 and expects policy rate reduction once inflation has subsided.

NBG noted that despite improvements in Georgia’s economic activity the demand side pressure on inflation is still low. NBG further noted improved conditions among Georgia’s trading partners and resulting increase in export of goods and tourism services and increased flow of remittances.

Inflation rate amounted to 6.1% y/y and 0.1% m/m in April 2017 while core inflation (excluding food items and energy products) stood at 3.3% y/y. Annual inflation was well above NBG’s target for 2017 of 4%.

The main contributing factors to monthly inflation in April were food and non-alcoholic beverages (+0.42ppts, up 1.4% m/m), while transportation (-0.23ppts, down 1.7% m/m) dragged monthly inflation down.

Annual inflation was mainly driven by food and non-alcoholic beverages (+2.31ppts, up 7.6% y/y), transportation (+2.11ppts, up 17.6% y/y) and alcoholic beverages and tobacco (+0.94ppts, up 14.5% y/y).

International arrivals were up 10.2% y/y to 510.6 thousand in April 2017. The number of visitors from Armenia stood at 119.6 thousand (up 13.2% y/y), followed by Azerbaijan at 113.3 thousand (up 7.1%% y/y), Turkey at 93.7 thousand (down 19.2% y/y) and Russia at 86.5 thousand (up 16.5% y/y). Noticeably, arrivals from Iran grew 2.8x y/y to 10.3 thousand in April.

Georgia’s gross international reserves stood at US$ 2.75bn (up 11.8% y/y and down 3.1% m/m) as of 30 April 2017. The NBG did not intervene in foreign exchange market during March. Georgia’s foreign reserves equal 3.6 months’ worth of imports.

 

Debt and Money Market

Eurobonds: during the week Georgia’s Sovereign Eurobond (GEORG 4/21) price was up 0.1% w/w to 111.1 (YTM 3.8%). BGEO Group JSC (BGEOLN 7/23) price was up 0.1% w/w to 101.0 (YTM 5.8%), Georgian Oil & Gas Corporation (GEOROG 4/21) price was unchanged w/w at 105.4 (YTM 5.2%), while Georgian Railway (GRAIL 7/22) price was up 0.1% w/w to 110.5 (YTM 5.4%).

 

Equity Market

On Friday’s trading session, TBC Bank Group PLC (TBCG LN) shares closed at GBP 16.40, up by 1.5% w/w. During the week 423.5 thousand shares traded on the London Stock Exchange.

During the week 465.9 thousand of BGEO Group PLC (BGEO LN) shares traded, closing at GBP 36.48 (up by 2.9% w/w) on Friday’s trading session.

Georgia Healthcare Group PLC (GHG LN) shares were up by 3.0% w/w closing at GBP 3.66 on Friday. During the week 122.2 thousand GHG shares changed hands on the LSE.

No trades were recorded on Georgian Stock Exchange.

 

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