Georgia’s banking system, dominated by TBC and Bank of Georgia, has expanded the volume of its aggregate assets by 11% y/y to GEL59.6bn ($18.86bn) at the end of October, driven by the robust 15% y/y advance of the loan portfolio to GEL41.7bn ($13.19bn), according to data provided by the National Bank of Georgia (NBG).

A broader picture shows that the expansion of the country’s banking system’s over the past decade has not been correlated with (or has not supported) similar expansion in the real sector. The robust wage remittances (reflecting Georgians’ economic activity abroad) and certain improvements in the country’s foreign trade have fuelled the banking system’s expansion.

When expressed in US dollars, the banks’ assets rose by 13% y/y and the loans by 17% y/y.

Compared to October 2019, before the crisis, the volume of assets and loans surged by 29% and 36% respectively (21% and 27% respectively, for the volume expressed in US dollars).

The figures reveal the robustness of the Georgian banking system and its continuous expansion over the past decade. However, it comes in sharp contrast to sluggish economic growth – which questions the ultimate utility of the financial system’s development.

Thus, the bank loan portfolio at the end of October 2021 accounts for 76.7% of GDP – calculated based on the latest four-quarter GDP available (end-June). Calculated under the same methodology for comparability, the loan-to-GDP ratio was 74.0% in October 2020 and 66.6% in October 2019. The ratio was only 31.6% 10 years ago in October 2011.

Over the past decade, the portfolio of bank loans nearly tripled (x2.9 times) from $4.49bn in October 2011 to $13.2bn in October 2021. The average annual growth rate of the loan portfolio was 11.4%, expressed in US dollars.

Georgia’s GDP increased, however, by less than a quarter from $13.5bn to $16.7bn at an average annual rate of 2.15%.