Super-Profit in Banks Indicates Deflation
28 March, 2013
Super-Profit in Banks Indicates Deflation
Ten-fold increased profit in Georgian banking sector in January-February of 2013 indicates ongoing dangerous deflation process dragging Georgia into economic depression.
Profit of Georgian banking sector in first two months of this year exceeded GEL 42 million that translates into more then 10-fold higher profit compared to the profit of similar period of 2012, making around GEL 4.6 million. The figure looks amazing against the background of the drop of GEL 20 million
in banking incomes plus deteriorated economic picture in the country at large: dwindling investment inflows, slowed businesses, lower demand on loans, reduced annual GDP figure and pessimistic prognosis of economic analysts predicting a new tide of crisis in prospect. Zurab Gvasalia, Head of Association of Georgian Banks [as reported by Commersant. ge media portal] believes banks owe the ten-fold-higher profit in this past two-months to increased activity of the small and medium business that inclines him to be optimistic over economic picture of the country this year. As a matter of fact, the first months of the year are relatively passive the global practice shows and once January-February of 2013 turned out so successful the coming months are expected to be only better.
“Banking sector cannot be active independently without the business activity,” he said and stressed that although the banking sector started the year of 2012 by losses, it closed the year by GEL 134 million of profit and by GEL 107 million bigger share capital. Economic analysts meantime believe that the banks super-profit bespeaks of ongoing deflation process dragging the country into economic depression rather than of growth and success in any sector. According to Lia Eliava, the alleged ten-fold growth in banking sector is simply an anti-deflation policy that prunes expenses by suspension of business project development and firing the labor force.
“If we zoom in the banks’ statistic data, it will be obvious that the sector shrunk in fact as their incomes dwindled by GEL 20 million in January-February of this year compared to similar period of 2012 [from GEL 367 million to 347 million] and the so-called high profit is a result of reduced outlays. Banks cut down expenses by almost GEL 57 million [from over GEL 358 million in the similar period of 2012 to approximately GEL 301 million this year] to combat the ongoing deflation process that is already on the scene and very likely will aggravate as the National Bank of Georgia (NBG) cannot keep the inflation rate at the targeted 6% level,” Eliava told Georgian Journal.
As a matter of fact the average inflation rate stands at -2.1% in Georgia at the moment. It fell below zero several months ago for that ex-power said many thanks to the NBG as it managed to escape inflation blaze. Now the country faces the deflation that, as analysts warn, bears much more dangerous risks than inflation. Deflation may plunge the country in deep economic depression when prices and consumer demand slump likewise, businesses shut down or try to survive by cutting down outlays on the expense of lowered business activity and the firing of the workforce thus triggering unemployment rate up.
“The US has been struggling with the possible deflation for the past decade by pouring as much money as possible into its economy to raise its dropping inflation rate so as not to fall below zero but to no tangible effect as of yet; however, Georgian central bank, due to its inadequate monetary policy, contrived to let the inflation slip below zero in several months while there was no precondition for that in the country,” Eliava elaborated. “Targeting on 6% of inflation rate means that the rate must float around 6%, not drop below the par.” Ditrich Muller, co-founder of Georgian Investment Group, also spots anti-deflation remedies in the alleged super-profit that banks faced recently. He warns to take deflation seriously and blames the NBG for artificially holding the exchange rate of Georgian national currency up that led to deflation as an aftermath.

Print
Other Stories
The most wanted fruits from Georgia
The fruit exportation has decreased in Georgia. According to Geostat (National Statistics Office of Georgia), this year, up until May Georgia exported 25 939 300 USD worth of fruit – 6 771 300 USD less than in 2018.
Investment Plan for Europe – Additional EUR 800 million for SMEs as EIF and ProCredit double support for innovative companies
The European Investment Fund (EIF) and ProCredit Group are providing an additional EUR 800 million to innovative small and medium-sized companies (SMEs),
Everything of comfortable life in one space – Second part of construction of one of the largest apartment complexes finished in Tbilisi
Apartment in ecologically clean environment, thousands of square meters of green yard, swimming pools, places for various sports activities, treks for walking and running, commercial spaces – all these available in one space is not a fantasy.
Batumi awarded Europe's Leading Emerging Tourism Destination 2019
World Travel Awards Europe Gala Ceremony 2019 took place on the 8th of June in Madeira, Portugal.
Coca Cola to open new factory in Georgia, will hire female drivers
Coca Cola is opening new factory in Georgia in December.
World's best party supply company now on the Georgian market
The largest party supply store in Georgia - MyDay is launching as the official distributor of AMSCAN from 2019.
Live as a marketing tool and an unprecedented live stream launched by Livetag
Sharing information has become smoother and more versatile in today’s technological world. Recently, live streaming, an online streaming media has become especially popular.
Theme and program of Caspian Energy Forum Tbilisi – 2019 changed
“The 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of the Azerbaijan-Georgia relations in the field of economy and energy”,
Misunderstanding over Poti deep sea ports
There was misunderstanding around deep sea ports in Georgia – in Poti.
High demand for dollars or the investment decline – Why Georgian Lari depreciates
$1 equals GEL 2,7470 in the official rate set by the National Bank of Georgia (NBG).
PSP Group confirms negotiations regarding purchasing of GEO Hospitals
PSP Group confirms negotiations regarding purchasing of GEO Hospitals.
New life to be given to Dashbashi Canyon
Georgia’s Agency of Protected Areas is planning to give new life to Dashbashi Canyon in Tsalka (southeastern Georgia).
Who is constructing “Khadori 3” Hydropower Plant in Pankisi Gorge?
Clashes broke out in Pankisi Gorge, Georgia’s northeastern region between special forces and residents
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
Georgian designers presented at Fashion World Tokyo 2019
The products of 11 Georgian designers are showcased at Fashion World Tokyo 2019,
Silknet raises $200 million in Eurobond issue
27 March 2019 - JSC Silknet (“Silknet”), one of Georgia’s leading telecommunications operators, has successfully priced a debut $200 million 5-year 11% senior unsecured bonds issue (the “Notes”).
Pistachio trees will be planted in Georgia
Dozens of hectares of Pistachio are planned to be planted in Georgia this year.
Toyota Safety Sense and Hybrid Technology
Toyota Caucasus, has presented two new models the 5th generation RAV4 and the 12th generation Corolla at Rustavi International Motorpark, several days ago.
Bidzina Ivanishvili “became number one oppressor of businesses in Georgia” - ICC Georgia chairman Fady Asly
Mr. Ivanishvili promised the business community to protect them from harassment and pressure, unfortunately his words died with the sunset of that day
The best brands of Belarus will be exhibited on a large-scale exposition in Tbilisi
"The Belarusians like to come to Georgia to relax near the sea in Batumi as well as to stay in sunny Kakhetia."
Don’t treat business like a hooker! - Georgian businessman Vasil Soprpmadze addresses politicians
Businessman Vasil Sopromadze, founder of the company "Fresco", addresses politicians
RAV4 No Compromise and Corolla Set to Impress – Two New Cars Presented by Toyota
Toyota Caucasus, the company constantly aspiring to greatness, has presented two new models the 5th generation RAV4 and the 12th generation Corolla.
Mamuka Khazaradze quits TBC bank, does not sell the TBC Bank share
I made a decision to leave TBC bank where I spent 27 years of my life
PHOTO OF THE DAY
GEL Exchange Rate
Convertor
18.07.2019
19.07.2019
USD
1
USD
2.8687
2.8714
EUR
1
EUR
3.2178
3.2191
GBP
1
GBP
3.5580
3.5832
RUB
100
RUB
4.5670
4.5608
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.8714
EUR
1
EUR
3.2191
GBP
1
GBP
3.5832
RUB
100
RUB
4.5608
July 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31