June growth estimate came in at 7.2% YoY and negative, -5.5% MoM in seasonally adjusted terms. The slowdown was well expected as if the real GDP adjusted for the seasonality would stay at May level through the remaining part of the year, the growth for the full year 2022 would reach as high as 15.7%. Nevertheless, the cooling was stronger than our 12.2% scenario would imply. In any case, this is another argument, combined with other indicators, that despite the above 10 percent outlook also this year, the overheating in the economy is still difficult to verify. Shortly this week we will publish the thematic insight on this topic.
Last week, June rates on loans and deposits also became available. In line with our expectations (slide 34), despite continuation of the tightening in the US, there is very limited pass through on the local deposit market. Furthermore, the USD deposit rates even declined somewhat and when looking at the banking system’s FC liquidity ratio, combined with the Larisation being a priority also expressed in the higher FC and LC spread differential, one could argue that at least this year there won’t be any pass through at all, unlike declined share of non-residents in the GEL Treasury securities likely primarily driven by the higher USD benchmark yield.
As for the continuous strengthening of the GEL, the strong net inflows are consistent with our expectations, but we were and in fact are still betting on more NBG interventions being consistent with our view on the GEL rates on Wednesday the NBG to leave the policy stance unchanged followed by the easing starting from the end of the year.