Georgia Capital PLC · LSE:CGEO
Georgia Capital — H1 2022 Earnings Presentation
22 slides from Georgia Capital's earnings presentation, August 2022
Slide 1: Macroeconomic Overview 2Q22 & 1H22 Results
MACROECONOMIC OVERVIEW 2Q22 & 1H22 RESULTS
Slide 2: Real GDP continuing double-digit growth in 2022
REAL GDP CONTINUING DOUBLE-DIGIT GROWTH IN 2022 REAL GDP UP 10.5% Y-O-Y IN 1H22 50% 45% REAL GDP UP 10.5% Y-O-Y IN 1H22 40% 26% 30% 19% 18.0% KEY DRIVERS 20% 14.6% 10% 10% 12% 11.6% 10% 7% 7% 7.2% 10% ➢ Strong external demand supplemented by the migration effect, as 4% 10.6% 0% remittance inflows gr
Slide 3: Georgian Lari – appreciating since mid-2021
GEORGIAN LARI – APPRECIATING SINCE MID-2021 APPRECIATING SINCE MID-2021, BRIEFLY INTERRUPTED AFTER THE RUSSIAN INVASION OF UKRAINE, GEL HAS NOW STRENGTHENED CLOSE TO PRE-PANDEMIC LEVELS AGAINST USD Sources: NBG GEL APPRECIATION DRIVERS 3.7 3.5 ➢ Record high remittance inflows, increasing by 65% y-o-
Slide 4: Net external earnings turned positive in 2Q22 largely on remittance inflows
NET EXTERNAL EARNINGS* TURNED POSITIVE IN 2Q22 LARGELY ON THE BACK OF REMITTANCE INFLOWS EXTERNAL EARNINGS (US$ MILLION) TERMS OF TRADE HAVE REACHED 112% ON AVERAGE IN 1H22, COMPARED TO 101% IN 2021 (JAN 2017=100) Money transfers (Inflows) Money transfers (Outflows) Tourism revenues Exports Imports
Slide 5: Inflation to decelerate gradually in the 2nd half of 2022
INFLATION TO DECELERATE GRADUALLY IN THE 2ND HALF OF 2022 INFLATION Y-O-Y VS. INFLATION TARGET Sources: NBG, GeoStat INFLATION TO DECELERATE BUT REMAIN 16 Headline Inflation Core Inflation Target CLOSE TO DOUBLE DIGITS IN 2022 12 11.5 ➢ Annual inflation reached 11.5% in July 2022 (12.9% on average i
Slide 6: Fiscal deficit to fall to 3.5% in 2022 on exceptional revenue
FISCAL DEFICIT TO FALL TO 3.5% IN 2022 ON THE BACK OF EXCEPTIONAL REVENUE PERFORMANCE AND MODERATING EXPENSES PUBLIC DEBT Sources: MoF FISCAL SUPPORT HAS BEGUN MODERATING External public debt to GDP, % Total public debt to GDP, % 59.9% ➢ Fiscal support moderated in 2022, with current expenditures 60
Slide 7: Sovereign ratings with favourable macro fundamentals
SOVEREIGN RATINGS WITH FAVOURABLE MACRO FUNDAMENTALS Key Ratings Highlights General Facts Rating Agency Rating Outlook Affirmed Ba2 Negative April 2022 BB Stable February 2022 Georgia BB Stable July 2022 Georgia is favorably placed among peers Fitch Rating Country Country Rating Outlook ▪ Area: 69,7
Slide 8: Georgia's key economic drivers
GEORGIA’S KEY ECONOMIC DRIVERS Top performer globally in WB Doing Business over the past 12 years Liberal ▪ Liberty Act (effective January 2014) ensures a credible fiscal framework; Fiscal deficit/GDP capped at 3%; Public debt/GDP capped at 60%. economic policy ▪ Following the emergency clause activ
Slide 9: Institutional oriented reforms
INSTITUTIONAL ORIENTED REFORMS Open Budget Index, 2021 | International Budget Partnership Economic Freedom Index | 2022 (Heritage Foundation) (Budget Transparency) Ireland 3 Georgia 1 Sweden 3 Lithuania 17 Norway 6 Latvia 18 Italy 10 Czech Republic 21 UK 12 Germany 14 Georgia 26 France 15 Bulgaria 2
Slide 10: Economic growth continuing at pace
ECONOMIC GROWTH CONTINUING AT PACE Gross domestic product Nominal GDP structure, 1Q21 According to preliminary estimates, real GDP grew by 14.9% y-o-y in 1Q22 Nominal GDP, GEL bn Real GDP, YoY % Other Industry 21% 18% 70 24% 60 60 20% 49 49 14.9% 50 45 41 16% 40 34 36 10.4% 29 31 12% Health 25 27 5%
Slide 11: Mar-20 May-20 Aug-20
0% -60% 120% 180% 240% 300% 60% 600% 0% -600% 1800% 1200% Jan-20 Jan-20 Feb-20 Feb-20 Mar-20 Mar-20 Apr-20 Apr-20 May-20 May-20 Jun-20 Jun-20 Jul-20 Jul-20 Aug-20 Aug-20 Sep-20 Sep-20 Oct-20 Oct-20 Nov-20 Nov-20 Dec-20 Remittances, y/y Dec-20 Jan-21 Jan-21 Feb-21 Feb-21 Mar-21 Mar-21 Apr-21 Apr-21 T
Slide 12: Employment dynamics catching up with recovery in wages
EMPLOYMENT DYNAMICS CATCHING UP WITH RECOVERY IN WAGES Unemployment rate down since 2H21 UNDP Human Development Index Sources: GeoStat Sources: UNDP Employed Unemployment % 0.9 0.79 0.81 1450 27.2 27.2 26.7 30 0.75 0.76 0.77 0.77 0.78 0.78 26.4 0.8 0.72 0.73 0.73 0.73 0.74 0.74 23.0 25 0.67 0.68 0.6
Slide 13: Inflation to decelerate from the 2nd half of 2022
INFLATION TO DECELERATE FROM THE 2ND HALF OF 2022 Inflation Y-o-Y vs. inflation target Inflation components Sources: NBG, GeoStat Source: GeoStat 16 Headline Inflation Core Inflation Target Food and non-alcoholic beverages Alcoholic beverages and tobacco Transport Housing and utilities 12 16 Other I
Slide 14: Current account deficit 13% of GDP in 1Q22 but expected near neutral in 2Q22
CURRENT ACCOUNT DEFICIT 13% OF GDP IN 1Q22 BUT EXPECTED TO BE CLOSE TO NEUTRAL IN 2Q22 Current account balance (% of nominal GDP) Exports and Re-exports, US$ billion Sources: NBG Source: NBG 30% The CAB was -13% of GDP in 1Q22, with the trade deficit improving but the primary 30% Georgian-originated
Slide 15: Diversified foreign trade
DIVERSIFIED FOREIGN TRADE Exports and imports of goods, Y-o-Y % Foreign Demand, 1H22 Source: Geostat Source:, Geostat 75% Imports, YoY % Exports, YoY % 75% 2% Crude materials, inedible, except fuels 3% 1% 60% 60% Manufactured goods 6% 45% 45% 25% 8% Machinery and transport equipment 30% 30% Chemical
Slide 16: Remittances at record high levels as tourism revenues bounce back
REMITTANCES AT RECORD HIGH LEVELS DUE TO THE MIGRANT EFFECT AS TOURISM REVENUES ALSO BOUNCE BACK Tourism revenues to GDP Tourism revenues by country Sources: NBG, Geostat Sources: GNTA Tourism revenues rebounded to 96% of 2019 level in May 2022 and 89% in June, aided by rebounding travel and the mig
Slide 17: Appropriate monetary policy stance ensuring macroeconomic stability
APPROPRIATE MONETARY POLICY STANCE ENSURING MACROECONOMIC STABILITY Monetary policy rate International Reserves Sources: NBG Sources: NBG NBG further increased the monetary policy rate to 11% in March 2022 and has left it International reserves reached $3.9 bn by the end of June 2022, up 0.1% y-o-y
Slide 18: GEL appreciating since mid-2021
GEL APPRECIATING SINCE MID-2021 Loans by currencies Dollarization ratios Sources: NBG Source: NBG Commercial bank lending has remained resilient throughout the year on the back of rebounding Both deposit and loan dollarization have fallen since May-June 2021, in parallel with GEL demand, with foreig
Slide 19: Tax revenues continue overperformance while expenditure growth has moderated
TAX REVENUES CONTINUE OVERPERFORMANCE WHILE EXPENDITURE GROWTH HAS MODERATED TAX REVENUES GREW BY 34% Y-O-Y IN 1H22, WITH VAT REVENUES GROWING TOTAL EXPENSES GREW BY 8% Y-O-Y IN 1H22, WITH A 9% Y-O-Y GROWTH BY 26% Y-O-Y AND INCOME TAX REVENUES GROWING BY 45% Y-O-Y IN CURRENT AND 4% Y-O-Y GROWTH IN C
Slide 20: Debt and fiscal deficit on course for consolidation
DEBT AND FISCAL DEFICIT ON COURSE FOR CONSOLIDATION AVERAGE WEIGHTED INTEREST RATE WAS 0.95%, WHILE REMAINING Public debt MATURITY TOTALED 8.9 YEARS AS OF 31 MARCH 2022 Sources: MOF Public debt was expected to fall to 51% of GDP but declined to under Source: MOF 50% in 2021 due to GEL appreciation a
Slide 21: Forward looking statements
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements, including, but not limited to, statements concerning expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or int
Slide 22: Company information
COMPANY INFORMATION Georgia Capital PLC Registered Address 42 Brook Street London W1K 5DB United Kingdom www.georgiacapital.ge Registered under number 10852406 in England and Wales Stock Listing London Stock Exchange PLC’s Main Market for listed securities Ticker: “CGEO.LN” Contact Information Georg