TBILISI

Georgia’s commercial banking sector reported a rise in net profit in amount of 212.696 million lari ($72.1 million) in the first month of this year compared with 113.368 million lari in January 2021 and 114.058 million lari in December last year.

The country’s central bank said that total income was 520.787 million lari, up from 453.052 million lari a year earlier. Banks reduced their expenses to 276.284 million lari, down from 325.001 million lari.

Last year, Georgian banks pursued recovery as lenders reported profits that offset the losses incurred a year earlier, when restrictions to stop the spread of the COVID-19 were first put into place, crippling the country’s tourist-reliant economy. Commercial banks reported a total net profit of 2.081 billion lari in 2021 compared to a profit of 99.3 million lari in 2020. The banking sector returned to profit only in November 2020.

Georgia’s highly tourism-reliant economy has been hit especially hard by the COVID crisis and lacks the resource-extraction or manufacturing base that has helped cushion the blow in some other ex-Soviet countries.

The country started its economic recovery in April last year when it recorded 44.8 percent year-on-year growth. Economic recovery continued to gather pace as the country eased the majority of the restrictions it had imposed to curb the coronavirus pandemic, although the growth had been gradually slowing since April.

The country brought some restrictions back in August amid a hike in the number of infections and fatalities.

Georgia’s gross domestic product (GDP) grew by 10.6 percent year-on-year in 2021 after contracting by 6.1 percent a year earlier. In December alone, the economy expanded by 9.6 percent, compared with a 7.9 percent contraction a year ago and a 12 percent growth in November last year. Growth was recorded in all sectors of the economy except for construction.

Earlier this month, Fitch Ratings has affirmed the outlook on Georgia’s long-term foreign-currency Issuer Default Rating (IDR) at ‘BB’ with a Stable outlook.

Fitch said that the economic recovery had been driven by domestic demand, strong inflows of net remittances, a partial tourism recovery, and fiscal stimulus (e.g. subsidies and social benefits). Growth in exports of goods also performed strongly due to the recovery of key trading partners and higher commodity prices.

For 2022 and 2023, Fitch forecast Georgia’s economy to expand by 5.5 percent and 5.3 percent, respectively, above the potential of 4.0-4.5 percent. Increased financial inflows will support private consumption and investment. Recovery in the tourism sector is also projected to pick up, with Fitch forecasting tourism receipts towards 80 percent of 2019 levels in 2022, after reaching 38.1 percent of 2019 levels in 2021.

According to the World Bank’s updated forecast, Georgia’s economy is expected to expand by 5,5 percent in 2022 as the “economy is projected to ease toward its potential growth rate in 2022 and 2023 amid tighter fiscal policy.”

Georgia’s banking sector, which includes 14 commercial banks, of which 14 have foreign capital, started to show its first signs of recovery at the beginning of the last year when some of the restrictions imposed by the pandemic were first eased.