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On the upside, gradual currency weakening since last year has already resulted in a better external balance. But the lagged effects of the monetary tightening will be seen later next year.
A third major driver for Georgia’s economy is the volatile regional economic context. The World Bank has cut its forecast for the advance of the Georgian economy in 2019, lowering its growth prediction by 0.2pp to 4.4% for this year and deciding on a deeper 0.5pp cut in its medium-term 2020-2021 outlook, according to its autumn Europe and Central Asia Economic Update, released on October 9. The sanctions from Russia will reduce GDP by 0.6%, it estimated.
The Asian Development Bank (ADB) has cut its 2019 growth outlook for Georgia to 4.7% from 5.0%. Also, in its Asian Development Outlook 2019 Update released on September 25, the ADB changed its anticipated 2020 GDP expansion for the South Caucasus country from 4.9% to 4.6%.
The reductions were attributed to the country’s modest outlook for private investment growth.
3.2 Macro outlook
World Bank cuts outlook on Georgia’s GDP amid Russian sanctions and weak regional context
The World Bank (WB) has cut its forecast for the advance of the Georgian economy in 2019, reducing its growth prediction by 0.2pp to 4.4% for this year and deciding on a deeper 0.5pp cut in its medium-term 2020-2021 outlook, according to its Europe and Central Asia Economic Update for autumn 2019, released on October 9. Sanctions from Russia would reduce GDP by 0.6%, it estimated.
Georgia’s GDP would decelerate to 4.3% next year, it added, assuming a full-year impact of Russian sanctions—which might be lifted sooner than expected, recent statements have indicated. A stronger 4.5% growth rate for Georgia is seen by the institution for 2022.
A flight ban imposed by Russia in July will take 0.6% of Georgia GDP this year, the World Bank said. Tourism revenues amount to as much as 20% of Georgia’s GDP and the number of visitors arriving in the country from Russia dropped by 20% y/y in September, following a decline that looked softer in the first two months after the ban was enforced. Stronger net exports, a recovery
14 GEORGIA Country Report November 2019 www.intellinews.com
