Page 16 - GEORptNov20

EBRD expects softer decline in growth but also slower recovery in Georgia
ADB issues revised 2020 GDP forecasting for South Caucasus trio
The World Bank drafted its forecasts before the dramatic flare-up in the conflict between Azerbaijani and Armenian forces over the breakaway Nagorno-Karabakh region.
Georgia’s economy will contract by 5% this year given the impact of the coronavirus (COVID-19) pandemic on its tourism industry, according to the latest Regional Economic Prospects report of the European Bank for Reconstruction and Development (EBRD), released on October 1.
The country’s economy will return to the level of 2019 in the second quarter of 2022, under the development bank’s revised scenario.
In its previous forecast, issued in May, the EBRD foresaw a deeper, 5.5% contraction for Georgia in 2020.
The number of foreign visitors arriving in the country fell by 76% y/y in January-August, and the negative impact was widespread, felt across many sectors, said the bank. But the impact on the hospitality sector was somewhat softened by an increase in domestic tourism, it added.
The central bank, the National Bank of Georgia (NBG), lowered the monetary policy rate three times in 2020, to 8.0% in August, the bank also noted, providing an additional possible explanation of why the GDP contraction was cushioned.
Georgia's international reserves increased to an all-time high of $3.9bn by the end of August on the back of official financing, including disbursements under an augmented IMF programme—another element that helped the government mitigate the economic crisis.
Under its updated forecast, the EBRD expects a slower rebound of 3.5% in 2021, a more cautious projection compared to the robust recovery of 5.5% it projected in May.
The EBRD said that the speed of the economic recovery in Georgia would depend mainly on the pace and strength of the country’s tourism recovery. The 3.5% GDP growth rate seen for next year was based on a strong tourism recovery next year, with other risks contained, it added.
The Asian Development Bank (ADB) has issued a September update of its GDP expectations for countries including the South Caucasus trio, Azerbaijan, Armenia and Georgia.
In its June prediction, the ADB forecast Azerbaijan’s GDP in coronavirus-afflicted 2020 would contract by 0.1% but it now expects it to shrink 4.3%.
For Armenia, the ADB in June forecast a GDP contraction of 3.5%, but it is now expecting a 4% decline.
The forecast for Georgia remains unchanged, with a 5% GDP reversal expected.
The changed forecasting for inflation can be seen in the second of the ADB tables at the foot of this article.
16​ GEORGIA Country Report ​November 2020 ​ ​www.intellinews.com