The National bank of Georgia publishes the new issue of macroeconomic forecast scenarios for the purpose of an International Financial Reporting Standard IFRS 9.

The scenarios are intended for promoting transparent, consistent, and efficient financial reporting in financial institutions. The current update of the scenarios serves to provide the financial institutions in a timely manner with forward-looking macroeconomic information in the face of great uncertainty caused by the Russian invasion of Ukraine.

In the current issue of the scenarios, the main drives of the encompassing macroeconomic variables are the duration of the Russia-Ukraine war and the possible actions of the world's leading central banks. The baseline scenario considers maintenance of positive economic activity in the country this year, which is caused by the high pace of lending and increased currency inflows. According to the upside scenario, the economic recovery is more sustainable compared to the baseline, which is achieved by the development of the transit potential of the country and a relatively quick elimination of the global supply issues. The adverse scenario assumes the prolongation of the Russia-Ukraine war and the further tightening of global financial conditions, which will be reflected in the reduction of economic activity in the country. The current forecast horizon is characterized by more than usual uncertainty and elevated risks.

According to IFRS 9, forward-looking information is essential for credit risk assessment. In particular, expected developments in macroeconomic and financial environment as well as domestic and external risks should be accounted for when assessing expected credit losses. This will facilitate timely recognition of credit risk, and therefore contribute positively to financial stability.

In addition, it is important that the macroeconomic assumptions used by different financial institutions are comparable. This can be accomplished by utilizing the published macroeconomic scenarios.