The financial system of Georgia was prepared to meet the shock of the Covid-19 pandemic and maintained resilience thanks to the financial stability policy that has been implemented in recent years, reads the National Bank of Georgia's (NBG) Financial Stability Committee report published today.

The impact of the Covid-19 pandemic has significantly reduced economic activity and increased financial stability risks worldwide. However, previous capital requirements imposed by the National Bank and the profits made by commercial banks have allowed banks to accumulate sufficient capital buffers to deal with stressful situations. In addition, in the pre-crisis period, the National Bank took a number of macroprudential measures to reduce excess household debt and loan dollarisation. This has helped reduce vulnerabilities in the non-financial sector and increased the resilience of the financial system to shocks", reads the report.

The NBG says that currently the country's financial sector is healthy and has accumulated sufficient capital and liquidity buffers to mitigate the shocks caused by Covid-19.

It also says that the microfinance sector is sustainable as well.

The report says that due to the pandemic it is expected the share of non-performing loans will increase, but that commercial banks have already created reserves for possible losses and have sufficient resources to ensure that lending to the economy continues smoothly.