Trends in household income and expenditure, and the pace of credit activity in Georgia

Abstract

Georgia's financial system remains stable and continues to support economic lending. As of April 2025, the banking sector maintains healthy levels of capital and liquidity. Compared to the previous year, the pace of credit activity has gradually normalized, and in April 2025, the annual growth of loans—excluding the exchange rate effect—stood at 15.5%. This growth was largely driven by an increase in business loans. According to data from the first quarter of 2025, the loan-to-GDP ratio remains below the long-term trend. On one hand, strong economic growth recorded in the first quarter and, on the other, the normalization of credit activity have led to a widening of the negative gap between loans and GDP. The committee estimates that, given the current dynamics of credit activity and the gradual normalization of economic growth, this negative gap will close in 2025. Accordingly, at this stage, there is no need to adjust the cyclical component of the countercyclical capital buffer. Commercial banks continue the phased accumulation of the neutral component of the countercyclical capital buffer. In January–May 2025, the volume of new loans issued by commercial banks (24 billion GEL) increased by 7% compared to the same period of the previous year (January–May 2024 – 22.4 billion GEL). For comparison, loan growth in the first five months of 2024 was 18.5%, in 2023 – 17.4%, and in 2022 – 12%. In summary: the growth rate of new loans issued by commercial banks in January–May 2025 has significantly slowed down.