Page 11 - Caucasus Outlook 2023

strong US dollar. The country’s real GDP grew by 10% in the first 10
months of the year compared to 10.5% in the same period for 2021.

Recovery in the tourism sector continued, with inflows from foreign
tourists surpassing pre-pandemic levels in 2019 already by October and
a total of $2.9bn in revenues. Double-digit growth was recorded in
many other sectors too, including energy, transport, and manufacturing.

The inflow of Russian businesses and IT professionals who found
refuge in Georgia boosted money transfers and further supported the
services and hospitality sectors. At the same time, Georgia’s trade
deficit widened by 29% y/y by October, while imports and exports also
increased, benefiting from the geographical diversification of trade.

However, rising current account inflows helped to cover the trade deficit
and supported the appreciation of the Georgian lari since a low point in
March, leading to an increase of foreign reserves.

Amid high geopolitical uncertainty, the Georgian authorities secured a
$280mn precautionary Stand-By Agreement with the IMF in June,
which is aimed at creating a more predictable business environment.
Georgia’s economy is likely to grow by around 9% for 2022 as negative
spillovers from the war in Ukraine have not yet materialised.

For 2023, EBRD predicts moderate GDP growth of 5%. This would be a
significant slowdown compared to the past two years of strong
economic recovery following COVID restrictions in 2020. Risks to the
Georgian economy remain high due to extreme uncertainty and a
significant probability of external adverse shocks.

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