The Budget and Finance Committee heard the Annual Report of the National Bank of Georgia [NBG] for 2024, introduced by its President, Natia Turnava. According to her, the primary task of the NBG is to ensure price stability, which stands as a prerequisite for long-term economic welfare.

"The NBG, chasing the aforementioned goal, undertakes the monetary policy by the inflation targeting mode, through which the inflation target level is being preliminarily determined, which currently constitutes 3%.

The monetary policy is being undertaken in a manner to maintain inflation at its target level over the average term. As a result of the NBG monetary policy, inflation in 2024 was maintained within the target index, averagely constituting 1,1% and 1,6% as a basic inflation.

The improvement of the total potential of economic production has played a significant role in the economic activities for 2024, which, deriving from the solid joint demand, has, to some extent, mitigated the current inflation pressure. Furthermore, the reduction of the electricity tariffs and the stable solid exchange rate of GEL for 2024 facilitated the decrease of inflation.

Following the stabilization of the inflation expectation, the NBG commenced the normalization of the monetary policy and reduced the rate to 8% for the 1st half of 2024. Against this backdrop, the credit activities have been accelerated, stimulating joint demand. Besides, the improvement of the total economic production potential was conditioned by high economic growth, resulting in 9,4% of GDP in 2024. The foreign demand had a certain positive reflection on the economic activities, specifically, as the global demand mitigated in the first half of 2024, the export was also reduced. However, the export revenues for the second half rapidly increased. At the same time, the role of Georgia as a middle corridor has recently been intensified, which has activated international forwarding and transportation.

Besides, the increased IT and hardware revenues have been maintained at a high level as a percentage of GDP, and the travel revenues increased by 7,3%. As a result of all aforementioned factors, the Service export share in GDP was at a high index, which facilitated the improvement of the current account.

The current account deficit in 2024 constituted 4,4% of GDP with the net direct foreign investments as one of the significant sources, similar to the preceding years.

International currency reserves of Georgia as of December 2024, constituted 4,4 bl. GEL. At the beginning of 2024, stemming from the favorable conditions in the markets, the international reserves were refilled through investments, while the provision of foreign currency to the market through foreign investments was necessitated for neutralization of single-time excessive fluctuations.

Macroeconomic fundamental factors in the 2nd half of 2024, which form the exchange rate, were solid, however, resulting from the vagueness, different expectations have been generated in the currency market, entailing excessive fluctuations. All these factors had a short-term impact on the exchange rate, however, the NBB resumed the refiling of the reserves.

The NBG net sales in 2024 amounted to 434.75 ml USD. Starting from December 2024, the upper ceiling of the reserve levels to secure foreign currencies attracted by the commercial banks increased by 5%, which increased the reserves at the end of the year. Monetary gold was added to international reserves in March 2024: NB acquired gold valued at 500 ml USD.

As of December 2024, the price of the monetary gold, upon the moment of its acquisition, increased by about 99 ml USD. As the reporter noted, the total credit portfolio of the bank system as for December 31, 2024, reached 62,5 bl. GEL and its annual growth without the exchange rate effect was at 17,1%.

The share of the corporate segment also increased, and the share of the micro, small and average segments in the total portfolio was reduced. The total share of the economically vulnerable sectors - real estate development, real estate management, hotels and tourism, restaurants, fast food, and auto dealers at the end of December 2024 constituted 18,2%.

The annual average GEL rate to USD and EURO for 2024 has been devalued compared to the preceding year, which was conditioned by short-term factors. The banks for 2024 maintained stable monetary positions in their operations and ensured compliance with the 20% limit established by the NBG for the total position of all currencies.

According to the reporter, the dollarization in the bank system remains high, as a result of which, the currency risk factor also remains significant for Georgian banks. The NB continues the oversight activity on the improvement of currency risk management. Against the backdrop of the increased credit activities in 2024, the net percentage revenues and bank transaction efficiency have also increased.

As of December 31, 2024, the non-bank financial sector was represented by 31 Microfinance institutions at 418 locations, 158 credit units at 296 locations, 505 currency exchange facilities at 713 locations, and one credit union", - said Natia Turnava.

The Committee gave a positive assessment of the report.