Key developments and challenges

After the economic contraction in 2009, Georgia is likely to experience only a modest recovery in 2010, reflecting relatively low levels of domestic and foreign investment and limited bank lending. Non-performing loans may increase further due to the economic slow-down and the malaise in the real estate sector, while foreign currency risks remain large due to the dollarisation of bank assets. Risks to this already negative outlook include the possibility of an even sharper decline in foreign direct investment (FDI) flows and remittances, which could lead to pressures on the currency and banks’ balance sheets.