Georgian Economic Climate (Q2, 2020)

Prepared

Georgian Economic Climate is a product of PMC Research Center. In this bulletin, we discuss Georgia’s economic climate as assessed by Georgian economists. The bulletin is based on IFO Institute methodology. 50 experts are participating in this initiative from Georgia. The survey was conducted in July 2020.

In the third quarter of 2020, the Georgian economic climate has slightly improved.

In this period, Georgian economists assessed Georgia’s present economic situation negatively. Moreover, the assessment of the present economic situation in this quarter improved compared to the second quarter of 2020, but worsened compared to the third quarter of 2019.

In the third quarter of 2020, Georgia’s economic situation for the next six months was also assessed negatively by Georgian economists. While expectations for the next six months have enhanced compared with the second quarter of 2020, they have deteriorated slightly compared with the third quarter of 2019.

In addition, the experts predicted Georgia’s main economic indicators. According to the results, in the third quarter of 2020, the expected real GDP growth for 2020 is -5%. Other main economic indicators are forecasted as follows:

• The inflation rate is expected to increase in the next six months, on a year-on-year basis;

• The Georgian Lari is currently overvalued against the US Dollar, Euro and Turkish Lira, and undervalued against the Russian Ruble.

• The export volume is expected to increase in the coming six months;

• The import volume is expected to increase in the coming six months;

• The export volume is expected to decrease less than the import volume, resulting in an improved trade balance in the next six months.

SPECIAL QUESTION

In the third quarter of 2020, Georgian experts assessed the post-pandemic recovery phase in the Georgian economy.

The majority of experts (60%) implied that the economy will need 12-18 months to reach its pre-pandemic state. They were asked to identify the sectors of economy that are most vulnerable to the spread of the virus. Accommodation and Food Service Activities were emphasized by 93% of experts, and Retail by 67%.

47% of Georgian economists assessed the government’s support to businesses as “partially sufficient”, while 20% assessed the support positively and 33% negatively. Furthermore, the government’s support to the population (both hired and self-employed individuals) was assessed as “partially sufficient” by 40% of experts. 33% viewed the support positively, and 27% negatively.

Based on the fact that government debt is growing significantly, the economists were also asked to specify tools to lower said debt. All indicated the need to cut a number of public servants, 47% emphasized better debt management, while cutting investment projects and reducing public wages were chosen by 20% and 33%, respectively.

60% of the economists stated that the average unemployment rate in 2020 would increase to 15-20% (the average unemployment rate in 2019 was 11.6%).

In addition, experts were asked to assess the change in total revenue from tourism (both local and foreign). 47% stated that revenue will decrease by 60-80%, 27% expected a decrease by 40-60%, while a decrease by 80-100% and 20-40% was expected by 13% and 7%, respectively.

Methodology

The ECI is based on quarterly expert assessments of the present economic situation, as well as expectations for the next six months. The scale ranges from –100 points to +100 points. An index of –100 means that all experts assess the economic situation as deteriorating (negative), while an index of +100 indicates improvement (positive), and 0 means neutral/no change.

By PMC Research