Notes to Consolidated Financial Statements continued Thousands of Georgian Lari 4. Significant Accounting Judgements and Estimates continued Forward-looking information continued Belarus Assigned As at 31 December 2018 As at 1 January 2018 Key drivers ECL scenario weight 2019Q1 2019Q2 2019Q3 2019Q4 2018Q1 2018Q2 2018Q3 2018Q4 GDP growth in % Upside 25% 0.87% 1.13% 1.98% 2.82% 3.24% 3.38% 3.56% 3.11% Base case 50% 0.40% 0.30% 0.75% 1.41% 2.96% 2.61% 2.24% 1.58% Downside 25% -0.07% -0.53% -0.47% 0.00% 2.67% 1.85% 1.02% -0.14% BYN/US$ exchange rate % Upside 25% 8.23% 6.94% 4.25% 2.55% 4.78% 4.97% 5.31% 5.56% Base case 50% 10.11% 9.55% 7.61% 5.57% 5.45% 5.91% 6.39% 6.78% Downside 25% 12.61% 13.50% 12.83% 10.95% 6.12% 6.69% 7.15% 8.17% CPI inflation rate in % Upside 25% 9.06% 5.70% 0.35% 5.59% 1.87% 4.22% 8.91% 4.74% Base case 50% 10.90% 7.22% 1.73% 6.80% 5.00% 8.05% 13.21% 9.77% Downside 25% 12.75% 8.72% 3.09% 7.99% 7.94% 11.06% 16.15% 13.39% All other parameters held constant, increase in GDP growth and decrease in foreign exchange rate and inflation would result in decrease in ECL, with opposite changes resulting in ECL increase. GDP growth input has the most significant impact on ECL, followed by foreign exchange rate and inflation. Retail portfolio ECL is less affected by foreign exchange rate inputs due to larger share of GEL-denominated exposures. However, retail portfolio ECL is affected by inflation which does not have significant impact on corporate ECL. Aggregation of financial instruments for collective assessment For the purpose of a collective evaluation of impairment, financial instruments are grouped within homogeneous pools as follows: corporate loan portfolio is grouped on the basis of loan repayment source type; retail loan portfolio is grouped on the basis of credit risk characteristics such as an asset type, collateralisation level, repayment source type and other relevant factors. As for SME and Micro loan portfolios, financial instruments are grouped based on asset type, overdue buckets, collateralisation level and other relevant factors. Determination of expected life for revolving facilities For revolving products the expected life of Financial Instruments is determined either with reference to the next renewal date or with reference to the behavioural expected life of the financial instrument estimated based on the empirical observation of the lifetime. Write-offs The Group writes off financial assets when there is no reasonable expectation of recovery which is materially unchanged for corporate and unsecured loan portfolios or for loans secured by collateral other than real estate as compared to the previous accounting policy under IAS 39. For mortgages and other loans secured by real estate the number of overdue days after which the balances are considered to be irrecoverable and are to be written off has been increased from 365 to 1460 days. If the amount to be written off is greater than the accumulated loan loss allowance, the difference is first treated as an expected credit loss expense. Any subsequent recoveries are credited to expected credit loss expense. 210 Annual Report 2018Bank of Georgia Group PLC