Page 13 - GEORptOct20

IMF completes virtual visit to Georgia
The International Monetary Fund (IMF) is expecting a 5% contraction in Georgia's economic output this year and anticipates that the possible realisation of risks may require maintaining exchange rate flexibility and additional policy support, according to a Fund statement issued at the end of a “virtual visit” paid to Georgian authorities.
“Growth is expected to contract by 5%, a slightly higher contraction than [foreseen] at the time of the Sixth Review [in April], partly reflecting a more severe slowdown in the second quarter of 2020 and a more protracted recovery in external demand. Given pervasive uncertainty about the pandemic, downside risks to the outlook dominate,” the Fund’s statement read.
The realisation of the risks, including a more prolonged slowdown in major trading partners and a slower-than-envisaged recovery in tourism, may require continued exchange rate flexibility and additional policy support, the Fund argued.
The IMF previously predicted a 4% contraction in the country's economy in 2020 and a return to growth of 4% in 2021. The Georgian authorities as things stand predict that the economy will contract by 4% this year.
The Fund welcomed the measures taken by the country's authorities, which include a temporary exemption from property and income taxes for tourism-related businesses, a doubling of the value-added tax refunded to them, a temporary exemption for individuals from paying interest on bank loans, and the introduction of benefits for utilities and also the restructuring of loans to entrepreneurs who are experiencing difficulties with payments.
But plans for preparing the fiscal consolidation needed after this year’s wide budget deficit, of some 8.5% of GDP, need to be drafted, the Fund also implied.
“Over the medium term, addressing revenue cuts in 2020 will be important to design gradual fiscal consolidation as required by the fiscal rule and create fiscal space for necessary spending on education and infrastructure,” the IMF said.
The IMF saw as correct the decision by the central bank to ease monetary policy in response to a slowdown in economic activity and easing inflationary pressures.
13​ GEORGIA Country Report ​October 2020 ​ ​www.intellinews.com