EBRD Leaves Georgia’s Economic Growth Forecast Unchanged

The European Bank for Reconstruction and Development (EBRD) left the forecast of Georgia’s economic growth for 2019 and 2020 unchanged, at 4.5%.

The EBRD’s latest Regional Economic Prospects report reads that GDP in Georgia grew by an estimated 4.7% year-on-year (y-o-y) in the first half of 2019.

“Inflows of money transfers are growing for the fourth consecutive year and credit growth remains robust, supporting private consumption,” the report reads.

It also says that exports of goods increased by 12.4% y-o-y in the first eight months of 2019.

The EBRD noted that the tourism sector remains strong despite the Russian ban, which took effect in July 2019 after Russian President Vladimer Putin withdrew direct flights to and from Georgia.

“The overall number of international visitors increased by 5.9% in the first nine months of 2019, compared with a rise of 11.1% in 2018. However, these events, coupled with domestic political uncertainties, have increased pressure on the domestic currency,” the report reads.

Regarding the recent fluctuations and devaluation of Georgia’s national currency, the EBRD says that the Georgian GEL (Lari) depreciated by 9.4% in the period January to September 2019, adding that inflation increased from 2.6% in 2018 to 6.4% in September 2019 on the back of the currency depreciation and an increase in excise taxes earlier in the year.

The report reads that this prompted the National Bank of Georgia to intervene on the foreign exchange market, and it has raised the monetary policy rate by 200 basis points, up to 8.5% in October. Official international reserves increased by 9.5% relative to the beginning of the year and stood at $3.6 billion in September 2019, providing around four months of import coverage.

“The Georgian economy is forecast to grow by 4.5% in both 2019 and 2020,” the report underlined.

At the same time, the forecasts for economic growth for Armenia, Moldova and Ukraine increased, yet decreased for Azerbaijan and Belarus. The report also reads that the pace of growth in the EBRD’s emerging economies is slowing on the back of a weaker global economic outlook, and pressure from slower growth in the Euro zone and China, US/Chinese trade tensions and a contraction in world automobile production.

Moreover, the EBRD’s latest Regional Economic Prospects report sees average growth of 2.4% in 2019 across all EBRD countries, compared with 3.4 per cent in 2018. It also sees a recovery to 2.9% in 2020, a small downward revision from the forecast of 3.0% in May and still clearly below 2017’s growth rate of 3.8%.

The report predicts steady growth in the EBRD’s southern and eastern Mediterranean region, adding next year’s upturn will be driven primarily by a stronger performance in Turkey and Russia.

To note, earlier this month the International Monetary Fund (IMF) lowered the forecasts of Georgia’s economic growth for 2020.

“The GDP growth in Georgia is projected to reach 4.3% in 2020, while the previous forecast was 4.8%,” says the International Monetary Fund.

In addition, the World Bank forecasts 4.6% economic growth in Georgia in 2019.

Further, according to the Head of the IMF Mission, Mercedes Vera-Martin, inflation forecasts for this year increased to 7.2%. However, the Fund predicts a decline in inflation for 2020.

By Tea Mariamidze

Image source: infrastory.com