The purpose of this report is to present the Financial Soundness Indicators (FSI) data in a way that is accessible and easy to interpret by a wide array of stakeholders, and help them analyze the economic implications underlying the FSI concepts. The report presents a “birds eye view” of Georgia’s financial system and its’ standing relative to other countries in the world and the developing countries in Europe/Central Asia. Additionally, the report analyzes the potential banking sector weaknesses, which if unchecked could stun growth and undermine further financial deepening.

The report presents the analysis of investment climate, which highlights the lack of experience in the line of business, lack of qualified management and personnel, and issues with financial literacy of the bank clients as some of the main obstacles to securing bank credit. High leverage ratios among the qualified borrowers appear to be one of the obstacles to securing credit as well. The report points to the lack of developed capital markets and lack of alternative ways to finance capital as one of the primary reasons behind high leverage ratios.

In the globalized world of today, increasing national competitiveness has become an important policy target for any country. While engaging in mutually beneficial trade, technological and cultural exchanges, countries find themselves in a race for scarce mobile resources such as financial capital and talent. Winning in this race are those locations that offer the best conditions for economic activity – skilled and disciplined labor force, high quality services and urban amenities, transparent and efficient public administration, etc. These locations – not only countries, but also regions and cities – serve as magnets for investment and people, and are able to grow and reach prosperity, the ultimate goal of economic policy.

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