BANKING NEWS ECONOMIC DIGEST

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1 BANKING NEWS Before July 15, get a Mortgage loan in GEL and enjoy the lowest effective interest rate - from 9.99% - without any additional cost and currency risk. If you would like your home renovation to change your mood along changing your residence, get a Renovation Loan without any proof of income and get property insurance as a gift. ECONOMIC DIGEST NBG Reduces Its Policy Rate by 25 basis points to 4.25%. The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on May 8, 2013 and decided to reduce the refinancing rate by 25 basis points to 4.25 percent. According to existing information, the inflation forecasts for the coming 4-6 quarters have gone further down since the previous meeting of the MPC. According to the current forecasts, it is expected that the headline CPI inflation will remain below its target level throughout this year and will approach it by the end of Both headline and core inflation were low in April, with the headline annual inflation reaching -1.7%. Decrease in inflation was mainly caused by the decline in food prices. The base effect and the reduction in regulated prices were important as well. The leading indicators of economic activity indicate it being weaker than expected in the first quarter of 2013,resulting in inflation falling below the expected level as well. Decline in aggregate demand pushes the price level downwards. Decrease of imports in the first quarter is another indication of slowdown in domestic demand. The credit activity of commercial banks still remains weak due to the decrease in loan demand. Low credit activity also weakens the interest rate channel of the monetary transmission.

2 საბანკო სიახლეები Given that the inflation is predicted to remain below the target in the medium term, the National Bank of Georgia decided to continue monetary easing and to reduce the Monetary Policy Rate. The NBG will continue to monitor the developments in the economy and financial markets and will act accordingly. The next meeting of the Monetary Policy Committee will be held on June 19, Business Sector of Georgia The number of registered business entities in Georgia reached in March 2013, which is 3,9% higher compared to the same period of the previous year and 9,6% higher com-pared to February According to the National Agency of Public Registry, 95,6% of registered businesses constitute commercial entities (Individual Enterprise, Solidity Limited Company, Limited Liabilities Company, Joint-Stock Company, Cooperative, Branch of a Foreign Legal Commercial Entity) and 4,4% are Non-Commercial Entities (Non-Commercial Legal Entity, Branch of Foreign Non-Commercial Legal Entity). In March of current year, compared to the previous month were increased both numbers of commercial (by 9,1%) and non-commercial (by 24,2%) entities. Raising tendency was observed also compared to the previous years same indicators in March 2013 the number of commercial entities were increased by 1,9% and the number of non-commercial entities by 82,7%. In March 2013, majority of businesses entities were registered as Individual Enterprises (2 435 entity, 56,1% of registered business entities) and as a Limited Liabilities Company (1 707 entity, 39,3 percent of registered business entities). In the same month, on country level there were registered: 189 Non-Commercial Legal Entity, 5 Branch of a Foreign Legal Commercial Entity, 4 Joint-Stock Company, 2 Cooperative, 1 Branch of a Foreign Legal Non-Commercial Entity and იმგზავრეთ 1 Solidity Limited უკრაინის Company. ავიახაზებით და ისარგებლეთ ფასდაკლებით! შეიძინეთ ავიაბილეთები 2013 წლის 20 თებერვლამდე VISA Infinite, Platinum, Gold, Business ბარათებით და ისარგებლეთ ფასდაკლებით : ეკონომკლასი 7%-იანი ფასდაკლება ბიზნესკლასი 10%-იანი ფასდაკლება Population of Georgia *ფასდაკლება ვრცელდება მხოლოდ უკრაინის ავიახაზების სალაროებში და მათი ვებგვერდის საშუალებით ( As of January 1, 2013 the number of population of Georgia equaled to 4 483,8 thousand persons, which is 0,3% ბილეთების შეძენისას; ფასდაკლების მისაღებად კლიენტმა წინასწარ უნდა გააფრთხილოს კომპანიის წარმომადგენელი, რომ გადახდა lower compared to the previous year s same indicator. შესრულდება VISA Infinite, Platinum, Gold ან Business ბარათით. According to the National Statistics Office of Georgia, 52% of country population (2 345,0 thousand persons) constitute მის.: female კ. ლესელიძის and 48% (2 138,8 ქ. 25 thousand persons) male. ტელ.: As of January , 2013, 26,1% of the population live in the capital of the country, Tbilisi, then follows: Imereti (16%), ვებგვერდი: georgia@flyuia.com Kvemo Kartli (11%), Samegrelo-Zemo Svaneti (11%), Kakheti (9%), Autonomous Republic of Adjara (9%), Shida Kartli (7%) etc. IBAN! Population of Autonomous Republic of Adjara was slightly increased by 0,1% during the year period. გაცნობებთ, რომ 2013 წლის 1 იანვრიდან, საქართველოს ტერიტორიაზე ყველა ტიპის ანგარიში წარმოდგენილი უნდა Industry იყოს Sector საერთაშორისო of Georgia ფორმატით. გთხოვთ, 2013 წლის 1 იანვრიდან საბანკო ოპერაციის მოთხოვნისას დააფიქსიროთ IBAN ანგარიშები თუ ოპერაცია სრულდება საქართველოს ტერიტორიაზე, სხვა შემთხვევაში დავალება According to ბანკის the preliminary მიერ ვერ შესრულდება. data of the National დამატებითი Statistics ინფორმაციისთვის Office of Georgia, მიმართეთ in the თქვენს IV quarter პირად of 2012, ბანკირს. production value in Industry increased by 10% and reached 1 737,0 million GEL. At the same period, turnover of industry of საქართველოს Georgia constituted ბანკის 1 895,0 აქტივებისა mil-lion GEL, და დაგროვილი which is 2,7% ქონების higher com-pared მართვის სამსახური. to the same data for the previous year. In the IV quarter of 2012, compared to the same period for previous year, number of employed in industry increased by 16% and equaled to

3 During the same period, the average monthly remuneration of employed per-sons in industry grew by 4% and reached 787,4 GEL. By type of economic activity in production value in Industry the biggest share falls on Manufacturing (80%) (on a year basis this indicator was increased by 13%), then follows Electricity, gas and water supply (16%) and Mining and Quarrying (4%). In the IV quarter of 2012, in manufacturing biggest share fall on manufacture of food products, beverages and tobacco products (42%), manufacture of basic metals and fabricated metal products (20%), manufacture of other non-metalic mineral products (12%), manufacture of chemical products (9%), manufacture of paper and publishing (4%) etc. In the IV quarter of 2012, compared to the same data for the previous year, manufacture of food products, beverages and tobacco products increased by 17%. Current Tendencies of Bank Deposits. Total volume of the non-bank deposits in the country's banking sector in-creased by 75,7 million GEL (1%) compared with the March 1, 2013, and reached 8 billion GEL by April 1, In March 2013, compared to the previous month, the volume of demand deposits decreased by 7,8 million GEL (by 0,2%) and term deposits increased by 83,5 mil-lion GEL (by 1,9%). The dollarization ratio of the total non-bank deposits constituted 64,14% by April 1, It increased by 0,41 percentage points compared to March 1, The annual average weighted interest rate on term deposits constituted 8,4%. In particular, the interest rate for national currency denominated deposits was 12% and the interest rate for foreign currency denominated deposits 7,4%. The share of US dollar in the total volume of foreign currency denominated deposits equals to 79,8% and the share of Euro equals to 18%. Inflation Rate in Georgia, April In April 2013, the annual inflation rate in Georgia equaled to -1,7 percent. The most significant contributions to the annual CPI rate were made by changes in the price level for the following groups: - Food and non-alcoholic beverages (by 3,7%) - Transport (by 4,7%). The highest price decreases were recorded for the subgroups of sugar, jam and confectionary (10,6%); vegetables including potatoes and other tubers (7,7%); milk, cheese and eggs (6,8%); fish (6,4%); fuels and lubricants (9,3%). During the period the prices were in-creased by 3,9% on Health. In April 2013, the monthly inflation rate in Georgia amounted to 0,4%. During the month, prices were decreased on: - Food and non-alcoholic beverages (by 1,3%); - Transport (by 0,6%). The prices decreased for the following sub-groups: milk, cheese and eggs (7,8%); sugar, jam and confectionary (1,6%), fuels and lubricants (1,4%). In the given period, prices were increased by 9,2% on Housing, water, electricity, gas and other fuels. At the same period, Average Inflation Rate (12 month average over the previous 12 month average, percentage change) in Georgia constituted -1,1%.

4 Real Estate Registration in Georgia The number of real estate registration transactions on the country level reached units in March 2013, which is 6,1% higher compared to the same period of the previous year. According to the National Agency of Public Registry, in March 2013, real estate registration is characterized by rising tendency. In March 2013, number of real estate registration transactions increased by 12,9% compared to the previous month of In March 2013, the number of primary registration transactions increased by 18,2 percent and secondary registration trans-actions increased by 11,6% compared to the previous month on the same year. In March 2013, compared to the same month of the previous year the number of primary registration transactions increased by 6,2% and secondary registration trans-actions increased by 6,1%. In March 2013, the number of primary registration transactions reached and secondary registration transactions equalled to units. During the mentioned period, the correlation between the primary and secondary transactions remained the same. In March 2013, in the total number of transactions 80,1% were secondary and 19,9% were primary transactions. Construction sector In the fourth quarter of 2012, turn-over of the Construction sector of Georgia reached 1 194, 6 million GEL, which is 1,7 times higher compared to the previous year s same period. According to the National Statistics Office of Georgia, the breakdown of turnover in construction sector by size of enterprises is the following: - Large size enterprises 79,2%; - Medium size enterprises 15,0%; - Small size enterprises 5,8%. During the mentioned period, output of the construction sector of Georgia rose also by 1,7 times and equalled to 1 191,0 million GEL. The breakdown of production value in construction by size of enterprises looks as follows: - Large size enterprises 79,1%; - Medium size enterprises 15,1%; - Small size enterprises 5,8%. During the same period, the number of employed persons in the construction sec-tor of Georgia increased by 58,3% and reached to Large size enterprises have the biggest share by number of employed in construction (57,4%), than follows Medium size enterprises (27,1%) and small size enterprises (15,5%). In the 4th quarter of 2012, average monthly remuneration of employed in construction sector of Georgia reached 1 104,2 million GEL, which is 5,7% higher compared to the same quarter of 2011 year. Tourism Statistics In January-April 2013, the number of non-resident visitors arrivals at national borders of Georgia equaled to , which is 32% higher com-pared to the same data for the previous year. In January-April 2013, visitors arrivals from Europe amounted to (96,2% of visitors), which is 32,4% higher compared to the same data for the previous year.

5 In the four months of 2013, visitors from America reached (0,6% of visitors). Visitors from Asian countries constituted persons (2,3% of visitors). Number of African visitors equaled to (0,1% of visitors), number of visitors from Middle East amounted to (0,7% of visitors) and from other countries visitors (0,1% of visitors). Producer Price Index for Industrial Products in Georgia. In April 2013, the Producer Price Index (PPI) for Industrial Products decreased by 0,8% compared to April The PPI decreased also by 0,8% over March On a year period the prices were de-creased on the following sections: - Manufacturing (decreased by 1,3%). The significant price decreases in this section were recorded for the subsections of manufacture of basic metals and fabricated metal products (5,1%); -Supply of electricity, gas and water (by 1,4%) On a month period (PPI rate over March 2013) the prices decreased on Manufacturing by 1%. The significant price decreases in this section were recorded for the subsections of manufacture of paper and publishing (18,5%) and subsections of manufacture of food products, beverage and tobacco products (1,9%). Transport and Communication Sector. In the IV quarter of 2012, turnover of transport and communication sector of Georgia constituted 1 088,6 million GEL, which is 21,5% higher compared to the IV quarter of During the mentioned period, output of transport and communication sector equaled to 753,3 million GEL, which is 22% raised compared to the IV quarter of the previous year. On a year period, the number of employed in transport and communication enterprises increased by 27% and reached Road transport, pipeline transportation have the biggest share in the output of enterprises of transport and communication (38,3%), than follows post and communications (30,5%), complementary transportation, tour-operators activity (28,6%), Air transport (2,5%), Water transport (0,1%). Service Statistics According to the National Statistics Office of Georgia, in the IV quarter of 2012, turnover of Service Statistics Section Real estate, renting and business activity constituted 492,0 million GEL, which is 12,6% higher compared to the III quarter of At the same period, Production value of Real estate, renting and business activity increased by 13% and reached 438,8 mil-lion GEL. In the IV quarter of 2012, compared to the previous quarter, also increased the number of employed persons and average monthly remuneration of employed per-sons in Real estate, renting and business activity. Specifically, on a quarter basis, the number of employed persons in Real estate, renting and business activity rose by 3,7% and average monthly remuneration in-creased by 11,4%.

6 GEORGIAN NEWS Georgian market review May 2013 Georgia s monthly CPI up 0.4%. Georgia s monthly CPI grew 0.4% in April, while the annual deflation amounted 1.7%. Transportation services was down 0.6% m/m, while food prices decreased 1.3% m/m. On an annual basis, food prices are down 3.7% and transportation is also down 4.7%. Bank of Georgia reports 1Q13 annualized ROE of 16%. Bank of Georgia Holdings (BGEO LN) released 1Q13 results with US$ 25mn net income. Net interest income increased 19% y/y to US$ 44mn, while net fees and commissions added 4% y/y to US$ 12mn. 1Q13 C/I ratio dropped 2ppts y/y to 43.8%. The lender s balance sheet grew 23% y/y to US$ 3.3bn, while equity increased 17% y/y to US$ 669mn. NPLs added 1ppts y/y to 4.3% of gross loans to clients. The bank reported 1Q13 annualized ROA and ROE of 3.1% (-0.4ppts y/y) and 15.9% (-3.1ppts y/y), respectively. Georgia s money transfer inflows grew by 9% y/y in April. Total money transfers in April grew 13% y/y to US$ 136mn, as foreign workers sent US$ 122mn in remittances back to Georgia (up 9% y/y). Russia accounted for around 53% of total foreign money transfers in April followed by Greece (13%) and Italy (7%).

7 SPECIAL OFFERS Kazbegi Rooms 20% discount for offers Card and OneCard VISA Infinite. The offer is Valid till June Kazbegi Rooms is the first project of Rooms Hotel Chain, high up in the glorious breathtaking beauty of the Caucasus. This part of Georgia is famous throughout the world for its dramatic mountainous range and the second highest peak (5,033 meters). It has been well loved by mountain climbers since Mount Kazbek was first climbed in 1868 by an Englishman from the London Alpine Club and has been an important climbers destination ever since. It also known for a variety of wild flowers which astonish visitors from all over the world. The perennials that bloom in the legendary gardens of English country houses have their origins here, brought back by the renowned botanists of the Victorian era. The region is named after the famous local noble pastoral poet Alexander Kazbegi who lived for seven years as a shepherd, writing his famous poems celebrating the beauty and richness of these mountains. The hotel is the very first of its kind in Georgia - a mountain resort hotel which combines a cozy open fire friendliness with a considerable degree of luxury: elegantly simple rooms with plush beds, breathtaking views, international TV channels and instant WiFi. The sense of intimacy and relaxation creates an atmosphere where singsongs that start at one table in the dining room, easily spread to the whole room, bringing people together in a way that is unthinkable in a more formal place. There are a charmingly attentive staff of 100 waiting to look after you in every way. The country atmosphere, from the mare and her foal grazing on the lawn below the wide terrace with its big wicker chairs, to the quad bikes that will take you roaring up the velvety slopes that surround the hotel, this is luxury in the depth of nature to be found nowhere else in this astonishingly beautiful country. The famous Georgian food is laid out in an informal buffet every evening alongside an extensive A La Carte menu and notable wine list. The indoor pool and spa to come plus the excitement of having a casino in a place of such natural beauty contribute to a holiday destination unparalleled in Georgia. ROOMS HOTEL OFFERS: - Total of 156 rooms included Standard King, Standard Double, Executive and Deluxe Executive rooms Types - Lounge Bar, - Bar Restaurant - Conference Rooms - Casino with gaming choice of Black Jack, Roulette, Texas Hold Em Poker, 6 Card Poker and Slot Machines - Pool & Fitness Centre (opening soon) IN ADDITION ROOMS HOTEL OFFERS - Free WIFI Internet connection - Complementary safe boxes at the reception - Complimentary onsite parking

8 Kempinski Hotel Badamdar Baku Take the advantage of exclusive benefits offered by Kempinski Hotel Badamdar Baku! 25% discount for accomodation in Suite, Junior, Executive and Royal rooms Book SPA treatment for two person (he / she) and get free SPA VİP Suite. Dine with 2 or up to 4 guests and get free bottle of wein provided by the Hotel. The offer is valid from 1 January 2013 to 31 December Established in 1897 in Berlin hotel group "Kempinski", headquartered in Geneva, is the founder of the world's largest hotel room organization - the International Hotel Alliance. Hotel Group "Kempinski" owns 65 five-star hotels in 28 countries. Five-star complex "Kempinski Hotel Badamdar" covers an area of 2.5 hectares. Total area - 84 thousand square meters. Hotel complex "Kempinski Hotel Badamdar" will function as a recreation center. How to take up this offer To redeem the offer inform the cashier that you are a Visa card holder, and pay with your card. The offer can be redeemed at the following locations: - Address:Baku, Mikail Mushfig 1C - Tell: (+99412) reception.badamdar@kempinski.com Terms and Conditions Offer valid 01 January 2013 through 31 December 2013, subject to availability. Void where prohibited, taxed or restricted by law. Purchaser must pay any applicable taxes and fees. Special offer is provided by the merchant at its discretionand in the prescribed manner. Provider of the program "Mobisky" reserves the right to modify or cancel any or all of these offers at any time and without prior notice.

9 Maristella Club 15% discount for Visa Infinite cardholders. Offer is valid till 31 December If you plan to accomplish a trip to Odessa and expect to spend your time in the most effective way, SPA hotel «Maristella Club» is an ideal place to escape from the daily routine. There are 16 comfortable rooms and suites with sea view equipped with air purifying system, satellite television, direct international phone line, electronic security system and Wi-Fi Internet access. The room rate includes: outdoor parking, gym with panoramic sea view, 25 meters swimming pool, sauna, hammam, and attendance of various fitness programs. The «Maristella Club» also offers its guests babysitter and playroom. You can enjoy freshly cooked breakfast in «Maristella Club» Restaurant or outdoor terrace with a wonderful sea view! Besides, the «Maristella Club» prepared more than 200 SPA treatments, where you can choose individual SPA ceremonies. For the convenience of the guests hotel can also arrange transportation services and excursions as well as VIP service at Odessa International Airport. How to take up this offer To redeem this offer inform the cashier that you are a Visa premium cardholder and pay with your card. The offer can be redeemed at the following locations: - Address: 3, Vanny Lane, Odessa, 65016, Ukraine. - Tell: Tel/fax luxury@maristella-club.com Terms and Conditions Offer valid 01 January 2013 through 31 December 2013, subject to availability. Void where prohibited, taxed or restricted by law. Purchaser must pay any applicable taxes and fees. Offer redemption and fulfillment is solely the responsibility of the merchant making the offer. Provider of the program reserves the right to modify or cancel any or all of these offers at any time and without notice.

10 MegaSun MegaSun provides a 15% discount for Visa Infinite card holders. Offer valid through 31 December 2013, subject to availability. MegaSun is the world's number one manufacturer of solarium equipment. There are 2 MegaSun studios in Baku, one is located at Teymur Aliyev str 67/71 (next to the concern Avesta), and the second at Samad Vurgun 17 (next to the school 1). The work at MegaSun is fully controlled by German experts, who take care of everything from hygiene and ending with the lamp replacement in solarium equipment. In the near future ZM Solutions plans to expand its network of solariums and in 2013 will open third salon. How to take up this offer To redeem the offer inform the cashier that you are a Visa card holder, and pay with your card. The offer can be redeemed at the following locations: - Address: Baku, Teymur Aliyev str, 67/71; Samad Vurgun str, 17 Gandjlik, Sahil - Daily from 10:00 to 21:00 - Tell: ; Terms and Conditions 15% discount for Visa Infinite card holders. Offer valid 01 January 2013 through 31 December 2013, subject to availability. Void where prohibited, taxed or restricted by law. Purchaser must pay any applicable taxes and fees. Special offer is provided by the merchant at its discretion and in the prescribed manner. Provider of the program "Mobisky" reserves the right to modify or cancel any or all of these offers at any time and without prior notice.

11 Pakhlava Pakhlava offers a 10% discount for Visa Infinite card holders. Offer valid through 31 December 2013, subject to availability. You can enjoy a variety of teas including the famous brand of tea VIVEL with traditional sweets, jams and dried fruits. Cozy oriental atmosphere and lovely staff will make you feel yourself surrounded with care and attention. If guest is willing to have a meal, Pakhlave could offer a big choice of traditional bakery dishes. How to take up this offer To redeem the offer inform the cashier that you are a Visa card holder, and pay with your card. The offer can be redeemed at the following locations: - Address: Baku, Khojali ave 14, Khatai - Daily from 12:00 to 02:00 - Tell: ( ) info@beat.az Terms and Conditions 10% discount for Visa Infinite card holders. Offer valid 01 January 2013 through 31 December 2013, subject to availability. Void where prohibited, taxed or restricted by law. Purchaser must pay any applicable taxes and fees. Special offer is provided by the merchant at its discretion and in the prescribed manner. Provider of the program "Mobisky" reserves the right to modify or cancel any or all of these offers at any time and without prior notice.

12 The Black Door Show your Visa card to the staff before making any payment. The offer can be redeemed at the following locations: - Address: Minsk,Vyery Kharujay str. 29A - Working hours: Tell:+375 (17) , +375 (44) blackdoor@list.ru Save up to 15% on dining with Visa Infinite. Offer is valid to 31 December Club & lounge The Black Door is a project from the creators of the bar "Vienna", which in 2012 celebrated 20 years old. It's known in Minsk for its relaxed atmosphere, excellent service and colourful cuisine. Traditions of the bar "Vienna" served as the basis for The Black Door. The restaurant is located in the city center. Music and cuisine are chief assets of The Black Door. The peerless photo-menu, culinary delights of European, Russian, Chinese and Japanese cuisine, rich themed cocktail card, a wide range of quality wines (including exclusive offers from Bordeaux and Burgundy) and alcoholic beverages, special menu for guests of a summer terrace. The Black Door is a perfect place for any meeting it can be a romantic date or a business dinner: dim lighting, large overstuffed sofas with cushions, sheer curtains that are at guest's request transform hall (120 seats) into small homey rooms, black and pink color shades in design - everything makes an intriguing intimacy and comfort. After 24:00 the restaurant turns into a karaoke club. Professional equipment, two projection screens, 9 LCD panels of HD, recording on CD, professional backing vocal, sound engineer, photographer, videographer, hosted show takes place every evening. Style, elegance, easiness, relax, which the magic lounge-atmosphere suggests, all these create an amazing mood of The Black Door. Terms and Conditions Offer valid for Visa Infinite cardholders. Void where prohibited, taxed or restricted by law. Purchaser must pay any applicable taxes and fees. Offer redemption and fulfillment is solely the responsibility of the merchant making the offer. Provider of program reserves the right to modify or cancel any or all of these offers at any time and without notice. Please, notice that no discounts are added.