David Utiashvili, Head of the Financial Stability Department at the National Bank of Georgia (NBG), has identified external risks as the main challenge to Georgia’s financial stability. Speaking on TV-program Business Course, he said the financial sector remains healthy, although several risks persist, including dollarization.
“Naturally, we have had four very good years, or five years since COVID, and this has been reflected across the economy, including the banking sector, which is healthy by all parameters. However, risks clearly exist. First and foremost, these are geopolitical risks, over which we have no leverage, and whose trajectory makes it virtually impossible to predict how they will develop. Such risks usually affect our economy in various ways, primarily through external inflows, which may slow and put pressure on the exchange rate. Dollarization remains a major challenge for our financial sector and the economy in general - 45% of loans are still denominated in foreign currency,” Utiashvili said.
He noted that Georgia has accumulated substantial reserves, but a fundamental shock could still affect the exchange rate, creating the most direct and significant impact on the banking sector and the wider economy. He also pointed to tourism and remittances as important sources of external inflows that could be affected by geopolitical developments.
Utiashvili also highlighted risks related to the real estate market, where trends have been strong in recent years but foreign demand remains significant. About 25% of real estate sales nationwide are to non-residents, including Israeli citizens and buyers from Arab countries. “This demand is very strong, but if circumstances change, the opposite could happen - these people could sell their apartments and choose another region. Therefore, external vulnerability is very high, and we are constantly trying, using the tools available to us, to build buffers in the banking sector, accumulate reserves and manage these risks as effectively as possible,” he said.
