Page 15 - GEORptNov19

ADB cuts 2019 and 2020 growth outlooks for Georgia on modest private investment projects
in credit growth and some fiscal stimulus will only partly offset Georgia’s loss incurred due to the Russian sanctions, the update added.
In its 2020 growth projection, the World Bank sees delays in several larger planned infrastructure projects and an easing of credit growth as international financial markets tighten.
Some 57 state-owned enterprises classified as high-risk have accumulated liabilities in the amount of 16% of GDP, the report noted. The government’s energy purchasing agreements are also seen as presenting fiscal risks. Furthermore, the agreements have not solved the deficit in installed power generation.
The Asian Development Bank (ADB) has cut its 2019 growth outlook for Georgia to 4.7% from 5.0%. Also, in it​s ​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 growth in private investment.
The ADB’s revised 2019 inflation forecast for Georgia is 4.3% (previously seen at 3.2%) while the year’s current account balance as a share of GDP is now anticipated at -7.3% (previously -7.9%). For 2020, inflation is predicted to be 3.5% (previously 3.0%) and the current account balance as a percentage of GDP is anticipated at -7.1% (previously -7.8%).
The report added: “Growth is estimated at 4.9% in the first half of this year, down from 5.4% in the same period of 2018 but outperforming last year as a whole. In services, an 8.1% expansion reflected gains in tourism, trade, transport, health, and education.
“Meanwhile, despite upticks in cottage industries and in utilities, industry contracted by 2.7%, with construction down by 9.6% and mining and quarrying by 3.8%. Agriculture shrank by 0.3%. Supporting growth on the demand side were increased public investment at the end of 2018, large refunds of value added tax advances, faster credit growth, and an 8.0% rise in remittances that encouraged private consumption.”
However, noted the update, total investment including from private sources contracted by 3.1% in the first quarter of 2019, a significant decline from growth of 11.2% in the same period of 2018.
The report also stated: “The potential risks to the economic prospects include regional geopolitical tension. Average inflation accelerated to 3.6% in the first half of 2019—above the 3.0% target set by the National Bank of Georgia, the central bank—reflecting higher prices for food, energy, and imported intermediate goods such as petroleum, along with higher excise taxes on tobacco.
“Prices rose by 5.2% for food, 2.9% for other goods, and 1.9% for services. Average inflation in the 12 months to June reached 3.0%.”
Georgia’s central bank, having reduced its refinancing rate by half a percentage point to 6.5% in March, raised it back to 7.0% in early September to moderate inflationary pressure.
15​ GEORGIA Country Report​ November 2019 ​ ​www.intellinews.com