Tag Archives: economy

Georgia’s CBank maintains rates

DEC. 14 2016 (The Conway Bulletin) — Georgia’s Central Bank slowed its interest rate cuts by keeping its key rate steady at 6.5% at its latest rate fixing meeting. It said that an increase in excise taxes and external factors would help lift prices temporarily although, there- after, price pressure will return. Inflation in Georgia stands at 0.2%, far below the Central Bank’s 5% target. It has cut its key interest rate from 8% at the start of the year.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Georgia Global Utilities issues 30m lari bond

TBILISI, DEC. 12 2016 (The Conway Bulletin) — Georgia Global Utilities (GGU), a subsidiary of London-listed BGEO Group, issued a 30m lari ($12m) bond, giving investors the chance to take a punt on the lari.

The bond, destined to GGU’s subsidiary Georgian Water and Power, offers a 3.5% premium over the Central Bank’s lari refinancing rate and will mature in five years.

The lari has slid by 15% in the past three months against the US dollar and is now trading at 2.66/$1. This prompted the Central Bank to stop easing its monetary policy and to keep interest rates stable at 6.5%.

Despite the fall in the value of the lari, BGEO was bullish about the issue. “This is in line with GGU’s funding strategy to continue to raise new funding in local currency, with longer-term maturity,” Irakli Gilauri, BGEO’s CEO, said in a statement.

Georgian Water and Power, which supplies water to Tbilisi, Mtskheta and Rustavi, was privatised in 2008. The sale was criticised because of a perceived lack of transparency over GGU’s British Virgin Islands registration.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Kazakhstan details mortgage plan

ALMATY, DEC. 12 2016 (The Conway Bulletin) — The Kazakh government plans to stimulate the housing market by subsidising mortgages under a programme dubbed Nurly Zher, which means the Bright Land in English.

At a government meeting, the economy ministry said that the plan would help build 1.5m new houses over the next 15 years. It said that the state would invest $5.3b into the scheme and that the private sector would invest $47b.

“To encourage private developers to take advantage of available credit resources the state will subsidize part of the interest rate on loans extended by banks,” the economy ministry said in its statement.

The plan is an ambitious attempt by the Kazakh government to stimulate its flatlining economy. GDP growth has been stagnan, pulled down by low oil prices and a recession in Russia. The tenge has lost around 50% of its value and ordinary Kazakhs are feeling the pinch. This year rare anti-government protests sprung up across the country.

The government has said that it will restructure old mortgages and has also said it will subsidise the interest rate on new mortgages by knocking 7 percentage points off the cost of borrowing. Commercial rates for mortgages in Kazakhstan are currently around 17%. Under the government’s plan, new mortgage holders will pay only 10%, with the government paying the equivalent of 7% of the mortgage.

Even so, people are sceptical.

“I’m scared of whole economic situation in the country,” said Bolat Mukashev, 25. “You don’t know what will happen tomorrow and there is no stability. Any moment tenge might collapse again and there is a high chance I could lose my job.”

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Georgia’s economy to grow in 2017

DEC. 15 2016 (The Conway Bulletin) — In Georgia’s governmental budget presented to and passed by parliament, officials said that they targeted GDP growth of 4% next year. Despite the tough economic conditions, Georgia has managed to engineer some positive economic growth in 2016, unlike its neighbours, Armenia and Azerbaijan, who have been hard hit by the drop in oil prices and a recession in Russia.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)f

China dominates Tajik economy

DEC. 13 2016 (The Conway Bulletin) — Tajik media quoted an unnamed source in the state’s statistics committee as saying that foreign direct investment had risen sharply in the third quarter of the year, mainly due to heavy infrastructure investments by China. The source said that China made up around two thirds of the investments, highlighting just how influential it has become over Tajikistan.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Azerbaijan to switch to fully floating currency in 2017

DEC. 12 2016 (The Conway Bulletin) — Azerbaijan plans to switch to a fully floating currency next year, the Central Bank said, signalling more turbulence for the manat.

The Central Bank has relaxed the manat’s peg to the US dollar twice in the past couple of years, allowing it, in effect to lose half its value. It has also been managing a fall of around 19.5% since June to trade at 1.79/$.

Media quoted the head of the Central Bank, Elman Rustamov, as saying that macro-stability meant that the time was now right to move to a fully floating currency.

Many Azerbaijanis would disagree, though.

As The Conway Bulletin has reported previously, many ordinary Azerbaijanis have lost confidence in the manat and have been trying to withdraw their savings and convert them into US dollars. Many banks in Baku have run out of US dollars.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Uzbekistan adopts budget deficit

DEC. 13 2016 (The Conway Bulletin) — Uzbekistan’s Senate adopted a government budget for 2017 with a deficit of around 1%, media reported. This is the second consecutive year that Uzbekistan has said that it will run a budget deficit and points to a new, and entirely relative, openness. Uzbekistan, like its neighbours, is having to deal with a sharp economic downturn. Uzbek economic data is notoriously unreliable.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Armenian economy shrinks

NOV. 30 2016 (The Conway Bulletin) — Armenia’s economy shrunk by 2.6% in the third quarter of the year, the country’s statistics agency said, confirming the poor economic sentiment in the country. In the third quarter of 2015 Armenia’s economy had grown by over 3%. Armenia is reliant on Russia which is suffering from a harsh economic downturn, linked to a fall in oil prices that has tipped it into recession.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Azerbaijani Central Bank defends economy policy

DEC. 1 2016 (The Conway Bulletin) — Azerbaijan’s manat currency dropped to its lowest ever level against the US dollar, continuing a decline that has wiped 18% off its value since June.

The collapse in the value of the manat, linked to still-subdued oil prices and weaknesses in the Russian economy, is stoking inflation. The lack of confidence in the manat has also triggered a run on US dollars, with many high street banks and exchange offices running out of the greenback.

On Nov. 30, the Azerbaijani Central Bank was forced to defend its policies.

Elman Rustamov, the Central Bank chief, told parliament that he was pursuing a tight monetary policy but he also admitted that the banking system was under strain.

“There are similarities between stabilisation and development,” he said. “If we don’t achieve macroeconomic stability, no investor will have confidence in us.”

International economists expect Azerbaijan’s economy to shrink by around 3% this year, underscoring the problems it is facing. In September, in an effort to prop up its manat currency, the Central Bank raised interest rates to 15% from 9.5%.

But on the streets of Baku, the mood is glum. A Bloomberg reporter said that only one of the nine banks he visited on Nov. 28 sold US dollars. Importantly too, he reported that the Black Market exchange rate for buying US dollars with manat was 5% higher than the official rate, an indication of the lack of confidence in the currency.

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(News report from Issue No. 307, published on Dec. 2 2016)

Georgia to protect mortgage holders as lari tumbles

TBILISI, NOV. 29 2016 (The Conway Bulletin) — Georgia’s government said it would protect home-owners who took out mortgages in US dollars and also that it would ban online consumer lending, reforms aimed at shoring up confidence in the government and its economic policies after the lari dropped to all time lows.

PM Giorgi Margvelashvili made the announcements after fresh economic data showed a drop in exports and lower-than-expected remittance flows from Russia had pushed the lari down to 2.56 against the US dollar by close-Dec. 1. This is 20% lower than it was valued at in June.

“According to our plan, loans which had been disbursed to individuals before Jan. 1 2015, and supported by real estate, would be recalculated in lari at a rate which is lower than the current by 20 points,” media reported him as saying.

“For example, if the rate today is 2.5 lari per dollar, the credit will be calculated at a rate of 2.3 lari per dollar.”

And Mr Margvelashvili also said that the government would ban credit agencies which lend money via the internet and also look to increase excise duty on cigarettes.

The changes are among the most radical presented by a government in the South Caucasus/Central Asia region since an economic downturn linked to a collapse in oil prices and a recession in Russia. Earlier this year, Kazakhstan announced similar measures to protect mortgage holders who had borrowed in US dollars.

Following Mr Margvelashvili’s intervention, the Georgian Central Bank also called for calm. It said that the sudden fall in the value of the lari was a short term adjustment that would steady.

“We expect that devaluation will stop shortly,” it said in a statement. “We would recommend society and economic agents not to make harsh decisions, which will negatively affect themselves.”

The Central Bank blamed the drop on the strengthening US dollar, the weak rouble and poor Georgian economic data.

Georgia’s GDP grew in the 12- months to the end of October by 1.3%, less than half the rate for the same period in 2015. Remittances from Russia, so vital to the economy, have been low.

And people are worried. David, a Tbilisi resident in his late 20s, said that he had a mortgage for $15,000 which he had taken out when the lari was valued at 2.19 against the US dollar. He said that the fall in the value of the currency had meant it was now virtually unpayable.

“I got this credit for my home, so if the dollar continues to rise, I will have to sell my home and give the credit back,” he said. “I don’t know what else I can do.”

Tamta, a Tbilisi resident, was also worried. “I am trying not to think about this otherwise I’ll go crazy,” she said. “Thank God nobody in my family has a mortgage in dollars.”

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)