Overdue bank loans have reached a record number.
Mostly False
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On 12 May 2015, the MP from the United National Movement, Giorgi Gabashvili, as a guest of the talk show, Archevani, stated that a large portion of the population is suffering from the negative trends in the economy, including the depreciation of the national currency. Mr Gabashvili emphasised that overdue bank loans have reached a record number.

FactCheck took interest in the statistics of overdue loans.

As of 1 April 2015, the amount of loans issued in the national economy reached GEL 14,715 million. Of these, 36% (GEL 5,274 million) comprises loans denominated in the national currency whilst 64% (GEL 9,441 million) comprises those issued in a foreign currency.

According to the data of the National Bank of Georgia, the volume of overdue loans was GEL 326 million as of 1 April 2015 which constitutes 2.2% of the total number of loans issued in the national economy. Of the overdue loans, 47% (GEL 152 million) is denominated in the national currency and 53% (GEL 173 million) is issued in foreign currency.

FactCheck verified the dynamics of overdue loans in 2008-2014.

From the beginning, we have to mention that the absolute amount of overdue loans (which does indeed stand at a record number) is not as important as their share in the percentage of the total amount of loans in order to assess financial stability. The amount of overdue loans has been growing year by year together with the growth of the total amount of loans issued in the national economy.

At the beginning of 2008, the share of overdue loans was 1.6% of the total amount of loans issued in the national economy. In the aftermath of the 2008 war and the 2009 world financial crisis, the percentage share of overdue loans increased and did indeed reach a record number. In June 2009, overdue loans constituted 5.1% of the total loans issued in the national economy. Of these, 8.6% comprised loans issued in the national currency and 3.6% comprised overdue loans issued in a foreign currency.

 

Graph 1: Overdue Loans in 2008-2010

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Source: National Bank of Georgia

 

Since the end of 2010 until the second half of 2012, the share of overdue loans (both in national and foreign currencies) in the total amount of loans has dropped. From the beginning of the second half of 2012 until July 2013, the share of overdue loans has increased which can be explained by the decreased economic growth rate in this period. However, since the second half of 2013, the share of overdue loans has been prone to decrease.

 

Graph 2: Overdue Loans in 2011-2013

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Source: National Bank of Georgia

 

At the beginning of 2014, the share of overdue loans constituted 2.2% of the total debt. Of this amount of overdue loans, 2.7% was issued in the national currency and 1.9% was issued in a foreign currency.

Since the second half of 2014, the economic growth rate started to drop with the national currency starting to depreciate from November which increased the debt burden for the part of the population which had taken bank loans in a foreign currency. However, despite this fact, the share of overdue loans has not increased significantly with the share of overdue loans even having decreased at the beginning of January 2015.

The January-March period of this year has shown a trend of growth in the share of overdue loans. However, this is not a “record” number and has slightly decreased as compared to the last year.

 

Graph 3: Overdue Loans in 2014-2015 (first four months of 2015)

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Source: National Bank of Georgia

 

The decreased economic growth rate together with the depreciation of the national currency did indeed worsen the financial situation for a significant part of Georgia’s population. However, these factors have not posed a threat to the financial stability of the banking sector largely due to the high capital buffer of commercial banks and their constructive policy toward debtors.

 

Conclusion

As of 1 April 2015, the amount of overdue loans was GEL 326 million. If taken in an absolute manner, it is indeed a record number. However, the volume of overdue loans has to be assessed with its percentage share in the total amount of loans.

The share of overdue loans in the total amount of loans was 2.2% as of 1 April 2015 which is not a record number. Even though the share of overdue loans has been on the rise in the period of January-March 2015, the number is still lower as compared to the number registered in the previous year. The share of overdue loans has been higher than 2.2% in the years 2010-2014.

Therefore, FactCheck concludes that Giorgi Gabashvili’s statement is MOSTLY FALSE.

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