Page 14 - GEORptFeb22

EBRD revives upwards Georgian GDP growth forecast to 7.5%
IMF projects Georgian economy to grow 7.7% in 2021, 5.8% in 2022
assumptions; the differential is expected to be around 1pp putting GDP growth above 11%. As for next year, our forecast is 6%. In 2022, exports, remittances and lending will moderate. There will also be a pronounced negative impact from the fiscal stimulus cycle next year,” Nadaraia said.
TBC Capital also revised upward its Georgia inflation forecast. The chief economist predicted that prices could rise as much as 14.5% this year, in end-of-year terms.
"As for inflation, our forecast was 13.8%. Now we have to increase it to 14.5%," Nadaraia stated.
The gas tariff increase from December 1 for legal entities in rural areas of Georgia would be most likely a precursor to a general gas price hike, according to a TBC Capital weekly research report.
Georgia’s economy looks set to grow by 7.5% this year, fully reversing the 6.2% contraction seen in 2020, the European Bank for Reconstruction and Development (EBRD) has estimated, revising upwards its forecast by 3.0pp compared to its last projection in June.
For 2022, the EBRD projects a robust 5.5% of growth.
Downside risks are associated with possible pandemic travel restrictions and political volatility, in addition to the effectiveness of the rollout of coronavirus vaccines - which is a more general concern for the category of low and medium-income countries.
Cumulative GDP growth in the period of January to August was 12% y/y, even though tourism, the main driver of growth in recent years, remains far below pre-pandemic levels, the EBRD pointed out.
The internal and external balances of Georgia have been under high pressure recently with inflation surging and the current account widening on scarcer tourism revenues.
Inflationary pressures have been increasing since the beginning of the year and the rate of inflation reached 12.3% y/y in September on the back of higher international food and oil prices and the pass-through of last year’s depreciation.
The National Bank of Georgia has reacted by increasing the refinancing rate three times in 2021 by a cumulative 2pp, to 10% by August.
Georgia’s current account deficit has widened this year with the increased export of goods and remittances only partially balancing out against the increased imports of goods and low level of exports of services (especially tourism revenues).
The International Monetary Fund (IMF) projects the Georgian economy to grow 7.7% in 2021 and 5.8% in 2022, reads the latest WEO report, titled World Economic Outlook: Recovery During a Pandemic.
With these indicators, Georgia will have one of the highest economic growth rates in the region of the Middle East and Central Asia.
Georgian Economy Minister Natia Turnava said that according to the latest IMF report Georgia will maintain its leading position in terms of economic growth both in the region and in Europe for the next six years.
We will have the highest economic growth rate of 5.8%, almost 6% per year. This will allow us to overcome the negative effects of the pandemic very quickly, to overcome poverty and to make our economy more diversified and stronger", said Turnava.
The Fund expects the economic rebound to help the government bring public
14 GEORGIA Country Report February 2022 www.intellinews.com