Georgia Capital PLC · LSE:CGEO
Georgia Capital — H1 2024 Earnings Presentation
20 slides from Georgia Capital's earnings presentation, August 2024
Slide 1: Macroeconomic Overview 2Q24 & 1H24 Results
MACROECONOMIC OVERVIEW 2Q24 & 1H24 RESULTS
Slide 2: Strong real GDP growth in 1H24, with inflation below target
STRONG REAL GDP GROWTH IN 1H24, WITH INFLATION BELOW TARGET GEORGIA’S ECONOMY CONTINUES TO EXPAND, WITH PRELIMINARY ECONOMIC GROWTH ANNUAL INFLATION BELOW THE 3% TARGET SINCE APRIL 2023, WITH JULY 2024 INFLATION AT 9.0% Y-O-Y IN 1H24 AT 1.8% Y-O-Y Headline Inflation Target End of Period Monetary Pol
Slide 3: Robust domestic economic activity driving higher-than-expected growth
ROBUST DOMESTIC ECONOMIC ACTIVITY IS DRIVING HIGHER–THAN–EXPECTED GROWTH LOANS GROWTH DECOMPOSITION BY SECTORS, (EXCHANGE RATE EFFECT EXCLUDED) GENERAL GOVERNMENT FISCAL EXPENSES, GEL BLN 25% Legal Entities Households Total Loans Growth rate, % Y-o-Y Current Expenditures Capital Expenditures Total E
Slide 4: Current account deficit at historically low levels
CURRENT ACCOUNT DEFICIT AT HISTORICALLY LOW LEVELS CAB NARROWED TO -5.0% OF GDP, SUPPORTED BY GROWTH IN THE TRANSFER AND SERVICES FOREIGN CURRENCY INFLOWS HAVE MODERATED BUT REMAIN ABOVE PRE-WAR LEVELS BALANCE Export of goods Money Transfers Tourism revenues Total FX Inflows Goods, net Services, net
Slide 5: Depreciation expectations fading; sovereign spread reflects geopolitical volatility
WHILE DEPRECIATION EXPECTATIONS ARE FADING, THE SOVEREIGN SPREAD CONTINUES TO REFLECT INCREASED VOLATILITY IN THE REGIONAL GEOPOLITICAL ENVIRONMENT WIDENED SOVEREIGN SPREAD REFLECTS RECENT GEOPOLITICAL VOLATILITY DESPITE RECENT DEPRECIATION, THE GEL HAS SINCE RECOVERED ITS VALUE, SHOWING ONLY O.2 %
Slide 6: Macro policy stance remains appropriate
MACRO POLICY STANCE REMAINS APPROPRIATE NET NBG INTERVENTIONS ON THE FX MARKET AND OFFICIAL RESERVE ASSETS THE OPERATING BALANCE SURGES DUE TO HIGHER-THAN-EXPECTED TAX REVENUE COLLECTION Net Interventions (LHS) Reserve Assets (RHS) 8000 600 6.0 Tax Revenues Current Expenses Capital Expenses Operatin
Slide 7: Macroeconomic wrap-up
STRONG GDP PERFORMACE DESPITE UNCERTAINTIES BELOW-TARGET INFLATION ROBUST EXTERNAL BALANCE SHEET MACROECONOMIC RECENT GEL DEPRECIATION PROVED TEMPORARY WRAP-UP MACROECONOMIC POLICY FRAMEWORK REMAINS APRROPRIATE 7
Slide 8: Sovereign ratings with favourable macro fundamentals
SOVEREIGN RATINGS WITH FAVOURABLE MACRO FUNDAMENTALS Key Ratings Highlights General Facts Rating Agency Rating Outlook Affirmed Ba2 Stable March 2024 BB Stable February 2024 Georgia BB Stable June 2024 Georgia is favorably placed among peers Fitch Rating Country Country Rating Outlook ▪ Area: 69,700
Slide 9: Georgia's key economic drivers
GEORGIA’S KEY ECONOMIC DRIVERS Top performer compared to peers across a wide range of international rankings 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 c
Slide 10: Institutional oriented reforms
INSTITUTIONAL ORIENTED REFORMS OPEN BUDGET INDEX, 2023 | INTERNATIONAL BUDGET PARTNERSHIP ECONOMIC FREEDOM INDEX | 2024 (HERITAGE FOUNDATION) (BUDGET TRANSPARENCY) Ireland 3 Georgia 1 Sweden 3 Lithuania 15 Moldova 5 Latvia 20 Norway 8 Czech Republic 24 Bulgaria 10 Italy 13 Portugal 29 Germany 14 Bul
Slide 11: Economic growth continuing at pace
ECONOMIC GROWTH CONTINUING AT PACE GROSS DOMESTIC PRODUCT NOMINAL GDP STRUCTURE, 1Q24 Nominal GDP, GEL bln (LHS) Real GDP, YoY % 80 24% 80 73 70 61 20% 60 50 50 16% 50 45 10.6% 11.0% onstruction, ducation, 41 35 37 7.5% 8.2% 8.4% 12% 40 29 32 Industry, 1 .1% . % . % 26 28 8% 30 19 Real state, 11.1%
Slide 12: ICT sector supports GDP growth and foreign currency flows
ICT SECTOR: SUPPORTS GDP GROWTH AND EMERGES AS A NEW SOURCE FOR THE FOREIGN CURRENCY FLOWS THE INFORMATION AND COMMUNICATION (ICT) SECTOR SHARE IN GDP STANDING EXPORTS OF ICT SERVICES (US$ MLN) AT 5.9% IN 2023, AS OPPOSED TO 3.2% IN 2018-2021 Information and Communication, Value Added (GEL mln, LHS)
Slide 13: Unemployment rate at historical lows
UNEMPLOYMENT RATE AT HISTORICAL LOWS UNEMPLOYMENT RATE AT HISTORICAL LOWS, DOWN TO 16.4% IN 2023 FROM 17.3% IN 2022 LABOR FORCE STRUCTURE 30 27.2 Employed Unemployed Labor force Labour force participation rate,% 26.7 25 23.0 21.7 22.1 20.4 1,800 60% 19.2 19.0 1,676 20 18.3 18.1 18.0 1,625 1,655 1,62
Slide 14: Inflation below the target level since April 2023
INFLATION BELOW THE TARGET LEVEL SINCE APRIL 2023 INFLATION Y-O-Y VS. INFLATION TARGET INFLATION COMPONENTS Food and non-alcoholic beverages Alcoholic beverages and tobacco Transport 16 Headline Inflation Core Inflation Target Monetary Policy Rate 16 Housing and utilities Other Inflation 14 12 12 10
Slide 15: Current account deficit at historically low level of 4.4% of GDP in 2023
CURRENT ACCOUNT DEFICIT REACHED A HISTORICALLY LOW LEVEL OF 4.4% OF GDP IN 2023 CURRENT ACCOUNT BALANCE (% OF NOMINAL GDP) EXPORTS AND RE-EXPORTS, US$ BILLION Goods, net Services, net Investment income, net Service exports Goods exports, geo-originated Re-exports 28% 3.3 Current transfers, net Curre
Slide 16: Diversified foreign trade
DIVERSIFIED FOREIGN TRADE EXPORTS AND IMPORTS OF GOODS, Y-O-Y % EXTERNAL TRADE BY COUNTRIES, 1H24, SHARE IN TOTAL 75% Imports, YoY % Exports, YoY % 75% Export 2.8 USD BLN Import 7.5 USD BLN 60% 60% Kyrgyzstan-16% Türkiye-17% 45% 45% Kazakhstan-12% Russia-11% Russia-12% United States-10% 30% 30% Azer
Slide 17: Tourism revenues back to full strength
TOURISM REVENUES BACK TO FULL STRENGTH, DESPITE LOWER NUMBER OF TRAVELERS COMPARED TO PRE-COVID LEVELS TOURISM REVENUES TO GDP INTERNATIONAL VISITORS BY COUNTRY Tourism revenues, US$ bln Tourism revenues, % of GDP Number of International Visitors in 1H24, Thousand Recovery level in 1H24 (% of 1H19 l
Slide 18: Appropriate monetary policy stance ensuring macroeconomic stability
APPROPRIATE MONETARY POLICY STANCE ENSURING MACROECONOMIC STABILITY MONETARY POLICY RATE INTERNATIONAL RESERVES 14 6,000 Official Reserve Assets, US$ mln Net Foreign Assets, US$ mln 12 5,000 International reserves reached US $4.7 bln in July 2024 (- 14.1% y-o-y) 10 4,000 8 8.0 3,000 6 2,000 4 1,000
Slide 19: Loans by currencies and dollarization ratios
0% 20% 30% 40% 50% -10% 10% -5% 0% 5% 10% 15% 20% 25% Mar-18 Dec-16 Mar-17 Jun-18 Jun-17 Sep-18 Sep-17 Dec-18 Dec-17 Mar-19 Mar-18 Jun-18 Jun-19 LOANS BY CURRENCIES Sep-18 Sep-19 Georgia Capital PLC | Source: NBG Business Loans Consumer Loans Dec-18 Dec-19 Mar-19 Mar-20 Jun-19 Jun-20 Sep-19 Dec-19 S
Slide 20: Government balance sheet improving with external public debt at lowest level
GOVERNMENT BALANCE SHEET IMPROVING WITH EXTERNAL PUBLIC DEBT (% OF GDP) HITS ITS LOWEST LEVEL SINCE 2015 AND DEFICIT IS IN LINE WITH THE FISCAL RULE GENERAL GOVERNMENT DEBT AT PRE-PANDEMIC LEVELS GENERAL GOVERNMENT DEBT STRUCTURE General Government Debt, External (% of GDP) 60% General Government De