World Bank Predicts 4.6% Growth of Georgian Economy in 2019
The recent report of the World Bank (WB) - Europe and Central Asia Economic Update - reads that this year the Georgian economy is expected to grow by 4.6%, 4.8% in 2020 and 5% in 2021.
The WB says Georgia’s economy expanded by 4.7% in 2018, driven by strong exports of goods and tourism services and robust private consumption and investment.
“Supported by rising investment and prudent economic management, the economy is projected to grow by 4.6% in 2019,” the report reads.
It also mentions that real GDP growth is projected to slow to 4.6% this year as external demand weakens and the National Bank of Georgia (NBG) tightens measures to encourage responsible lending.
“While newly introduced measures in the banking sector are expected to slow credit growth and private consumption, they will strengthen the resilience of the sector and its ability to sustainably support the economy,” the report reads.
The outlook says that inflation will remain low, anchored by the credible monetary policy of the NBG.
“Fiscal operations will continue to shift from current to capital expenditures in the medium-term, while efficiency improvements will create some additional fiscal space for higher capital spending. Public debt is projected to stabilize around 43% of GDP by 2020,” the report reads.
The bank added that national poverty rate, at 21.9% in 2017, will return to a declining trend as economic growth remains robust and translates into higher incomes.
“Economic expansion will lead to more employment and income-generating opportunities for those at the bottom of the income distribution. Increases in pensions and social assistance in 2019 (also planned for future years) will help reduce poverty further,” the WB outlook reads.
Regarding risks and challenges in Georgia’s financial system, the report says Georgia will remain vulnerable to regional developments and the risks associated with a sharp decline in export demand or a reduction in remittance inflows.
“While the Russian economy has withstood external shocks and the Turkish economy has begun to stabilize, a fresh round of disturbances in either economy could undermine Georgia's prospects for tourism and investment, complicate access to financial markets, and negatively impact economic growth,” the report reads.
However, the outlook also reads that with its stable business environment, Georgia is well placed to attract investors from neighboring countries due to stable operating environment.
The report also reads that economic growth in the Europe and Central Asia region slowed to 3.1% in 2018, and is projected to decline to 2.1% in 2019, amid slowing global growth and uncertain prospects.
“Europe and Central Asia are vulnerable to global uncertainty, and face several long-term challenges, including aging populations, declining productivity, weakening investment, and climate change. The good news is that there is a range of policy options available to boost growth and mitigate these challenges,” said Cyril Muller, World Bank Vice President for Europe and Central Asia.
He added that countries should “close investment gaps, improve governance, participate more in global value chains, and ensure more people have access to financial services including bank accounts and digital payments.”
By Thea Morrison