Georgia Capital PLC · LSE:CGEO
Georgia Capital — 1H23 Earnings Presentation
20 slides from Georgia Capital's earnings presentation, August 2023
Slide 1: Macroeconomic Overview 2Q23 & 1H23 Results
MACROECONOMIC OVERVIEW 2Q23 & 1H23 RESULTS
Slide 2: Real GDP up by 7.6% in 1H23, while inflation has fallen below the target
REAL GDP UP BY 7.6% IN 1H23, WHILE INFLATION HAS FALLEN BELOW THE TARGET PRELIMINARY ECONOMIC GROWTH STANDING AT 7.6% Y-O-Y IN 1H23, ANNUAL INFLATION STANDING BELOW THE 3% TARGET SINCE APRIL 2023, FOLLOWING UP ON TWO YEARS OF DOUBLE-DIGIT EXPANSION (10.5% AND WITH JULY 2023 INFLATION PRINTED AT 0.3%
Slide 3: The information and communication sector has emerged as a significant driver of economic growth
THE INFORMATION AND COMMUNICATION SECTOR HAS EMERGED AS A SIGNIFICANT DRIVER OF ECONOMIC GROWTH THE INFORMATION AND COMMUNICATION (ICT) SECTOR SHARE IN GDP HAS IN THE LAST FOUR QUARTERS (2Q22-1Q23), THE ICT SECTOR HAS BEEN THE SURGED TO 5.5% IN 1Q23, AS OPPOSED TO 3.1% IN 2018-2021 LARGEST CONTRIBUT
Slide 4: Improved external position
IMPROVED EXTERNAL POSITION CURRENT ACCOUNT COMPONENTS AND FDI INFLOWS (% OF NOMINAL GDP) APPRECIATING SINCE MID-2021, BRIEFLY INTERRUPTED AFTER THE WAR, GEL HAS NOW STRENGTHENED TO ABOVE PRE-PANDEMIC LEVELS AGAINST USD 28% 18% 3.8 USD/GEL 8.0% 3.46 3.40 8% 3.3 12.5% -2% 2.8 -12% -4.0% -3.2% -5.6% -9
Slide 5: Appropriate macro policy stance
APPROPRIATE MACRO POLICY STANCE INFLATION Y-O-Y VS. INFLATION TARGET GENERAL GOVERNMENT DEBT (% OF GDP) 16 Headline Inflation Core Inflation Target Monetary Policy Rate General Government Debt, External (% of GDP) General Government Debt, Total (% of GDP) 12 60.1% 10.25 60% 8 50% 47.6% 41.8% 4 3.2 3
Slide 6: Macroeconomic wrap-up
STRONG GDP PERFORMACE BELOW - TARGET INFLATION ROBUST EXTERNAL BALANCE SHEET MACROECONOMIC WRAP-UP GEL/US$ ABOVE THE PRE-PANDEMIC LEVELS SOUND MACROECONOMIC FRAMEWORK 6
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 Positive July 2023 Georgia is favorably placed among peers Fitch Rating Country Country Rating Outlook ▪ Area: 69
Slide 8: 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 9: Institutional oriented reforms
INSTITUTIONAL ORIENTED REFORMS Open Budget Index, 2021 | International Budget Partnership Economic Freedom Index | 2023 (Heritage Foundation) (Budget Transparency) Ireland 3 Georgia 1 Sweden 3 Latvia 17 Norway 6 Lithuania 20 Italy 10 Czech Republic 21 UK 12 Portugal 30 Germany 14 France 15 Japan 31
Slide 10: Economic growth continuing at pace
ECONOMIC GROWTH CONTINUING AT PACE Gross domestic product Nominal GDP structure, 1Q23 Nominal GDP, GEL bn (LHS) Real GDP, YoY % 72 24% 70 60 20% 60 49 49 15.0% 50 45 16% 41 40 36 10.5% 10.1% 34 12% 31 27 29 7.7% 30 25 8% 20 14 16 4% 10 0% 0 -10 -4% -6.8% -20 -8% 2011 2012 2013 2014 2015 2016 2017 20
Slide 11: Jun-21 Oct-21 Jun-23
0% 60% 120% 180% 240% -60% 0% 600% 1200% 1800% -600% Apr-20 Apr-20 Jun-20 Jun-20 Aug-20 Aug-20 Oct-20 Oct-20 Dec-20 Dec-20 Feb-21 Feb-21 Apr-21 Apr-21 Jun-21 Remittances, y/y Tourism Revenues, y/y Jun-21 Aug-21 Aug-21 Oct-21 Oct-21 Dec-21 Dec-21 Feb-22 Feb-22 Apr-22 Apr-22 Jun-22 Jun-22 Georgia Capi
Slide 12: Unemployment down at historic lows
UNEMPLOYMENT DOWN AT HISTORIC LOWS Unemployment rate at historical lows Participation rate in total 15+ population 1450 27.2 27.2 26.7 Employed, Thsd Unemployment, % 30 26.4 Hired Self-Employed Unemployed Participation Rate 23.0 25 54% 54% 55% 55% 54% 54% 21.9 21.7 21.6 21.9 22.1 51% 52% 53% 53% 52%
Slide 13: 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 Housing and utilities Other Inflation 16 14 12 12 10
Slide 14: Current account deficit remaining low at 3.2% of GDP in 1Q23
CURRENT ACCOUNT DEFICIT REMAINING LOW AT 3.2% OF GDP IN 1Q23 Current account balance (% of nominal GDP) Exports and Re-exports, US$ billion Goods, net Services, net Investment income, net 28% Current transfers, net Current account FDI, inflows Service exports Goods exports, geo-originated Re-exports
Slide 15: Diversified foreign trade
DIVERSIFIED FOREIGN TRADE Exports and imports of goods, Y-o-Y % External trade by countries, 1H23, share in total 75% Imports, YoY % Exports, YoY % 75% Export 3,1 USD BN Import 7,2 USD BN 60% 60% Armenia -14% Turkey-17% 45% 45% Azerbaijan-14% Russia-13% 30% 30% Russia-11% United States-11% 15% 15% K
Slide 16: Tourism revenues bounce back
TOURISM REVENUES BOUNCE BACK Tourism revenues to GDP International Visitors by country Tourism revenues, US $ mn Tourism revenues, % of GDP Number of International Visitors in 1H23 (LHS) Recovery level in 1H23 (% of 1H19 level) (RHS) 4,000 20% 700 3,500 583 578 Total international visitors reported
Slide 17: Appropriate monetary policy stance ensuring macroeconomic stability
APPROPRIATE MONETARY POLICY STANCE ENSURING MACROECONOMIC STABILITY Monetary policy rate International Reserves 6,000 14 Official Reserve Assets, US$ mln Net Foreign Assets, US$ mln 12 5,000 International reserves reached US $5.1 bn in June 2023 (+ 29% y-o-y) 10 10.25 4,000 8 3,000 6 2,000 4 2 1,000
Slide 18: GEL appreciating since mid-2021 and now above pre-pandemic levels
80 90 100 110 120 130 70 0% 10% 20% 30% 40% 50% -10% Jan-22 Jun-17 Jan-22 Sep-17 Mar-22 Dec-17 Mar-18 Apr-22 Jun-18 May-22 Sep-18 Loans by currencies May-22 Dec-18 Exchange rate indices Jun-22 Mar-19 Jul-22 Jun-19 Georgia Capital PLC | Source: NBG, Bloomberg Sep-19 Aug-22 Dec-19 GEL Loans, YoY Sep-2
Slide 19: Georgian banking system remains liquid and well-capitalized
GEORGIAN BANKING SYSTEM REMAINS LIQUID AND WELL-CAPITALIZED Regulatory /Tier1 capital to risk-weighted assets, % (latest 2023) 35 29.0 28.0 30 24.6 24.0 25 21.8 21.0 21.6 20.9 20.5 20.5 20.2 18.8 18.7 19.5 18.6 20 18.3 17.3 16.8 16.5 16.9 16.8 16.3 15.4 14.2 15 10 5 0 REG. Tier1 REG. Tier1 REG. Tier
Slide 20: Public debt shrinking below pre-COVID levels and fiscal deficit falling
PRELIMINARY ESTIMATES SHOW PUBLIC DEBT SHRINKING BELOW PRE- COVID LEVELS AND THE FISCAL DEFICIT FALLING TO 3.1% OF GDP IN 2022 Public debt at pre-pandemic levels Public debt structure General Government Debt, External (% of GDP) 60.1% 60% General Government Debt, Total (% of GDP) 50% 47.6% Average w