Page 17 - GEORptNov21

3.2 Macro outlook
Georgia’s government raises 2021 GDP forecast to 9.5%
Moody’s expects Georgian economy to grow 7.3% in 2021
The government of Georgia has revised upward its forecast for this year’s economic growth from 7.7% to 9.5%, while it expects 6% growth next year, according to the 2022 budget planning quoted by BusinessPressNews.ge.
In an alternative forecast, the Asian Development Bank (ADB) said in a report on September 22 that it expected Georgia’s economy to grow by 8.5% in 2021 (its last forecast, anticipating 3.5%, was issued in April), driven by an expansion in agriculture, industry, and services and the gradual lifting of restrictions imposed due to the coronavirus (COVID-19). ADB also improved the forecast for next year, moving it up to to 6.5% from 6%.
"According to the forecasts as of now, real GDP growth is expected to reach 6.0% in 2022 and an average of 5.5% per year in the coming years. The GDP deflator forecast is projected at 4.5% in 2022 and at 3% in subsequent years. Based on macroeconomic indicators, the nominal GDP in 2022 will be GEL 64.7 bln ($21bln)," a conclusion in the draft budget planning stated.
The government expects that the economy will grow by 9.5% this year to GEL58.4bn ($18.8bn) in nominal terms.
"Economic growth rates higher than expected were seen in June-August,” the budget planning documen read.
The economic growth rate for the second quarter was 29.9%, while there was 9.9% in July and 10.3% in August, resulting in real economic growth of 12.0% according to eight-month preliminary data.
Based on actual data, the GDP deflator was also revised upward to 8.0%.
As for inflation expectations, although the inflation rate will rise to 8.9% by 2021, the government expects the overall price level to decline in the medium term and remain at the target of 3% in 2022-2025.
Global ratings agency Moody's Investors Service expects the Georgian economy to grow by 7.3% in 2021, following a 6.2% contraction in 2020. “The recovery is underpinned by fiscal policy support to consumption in 2021 and signs of a steady rebound in regional tourism. Remittances and non-tourism exports, such as beverages, vehicles and machinery and equipment, have also demonstrated robust growth," said Moody's.
Moody's expected growth to be at a potential 4-5% in the next few years, driven by increased investment in productivity-enhancing infrastructure in agriculture and manufacturing, further increases in exports to more diversified markets including Europe, partly reflecting additions to Georgia's free trade agreements, and rising incomes supporting consumer spending.
Moody's expected inflation to fall towards the National Bank of Georgia's (NBG) inflation target of 3% from 12.8% currently after temporary factors fade and tight monetary policy offsets commodity price and international supply constraint pressures.
“The current account deficit will also begin to narrow from a peak of 12.5% of GDP in 2020 towards pre-pandemic levels of around 5%, as remittances and non-tourism exports grow solidly and the longer-term benefits of reforms are realized, including reform of the pension system to build domestic savings,"
17 GEORGIA Country Report November 2021 www.intellinews.com