Page 12 - GEORptSep20

Georgian parliament budget committee forecasts 10.7% plunge in Q2 GDP
AIIB extends €45mn to Georgia for crisis mitigation
the first half of 2021.
Renaissance Capital said that there was an opportunity to continue to soften the monetary policy. It expected that the refinancing rate would be around 6.5% by the end of 2020, with gradual mitigations of 0.25-0.50pp. Renaissance also said that it believed the National Bank of Georgia considered the value of the dollar to be at a stable exchange rate to the Georgian lari (GEL) at GEL3.00-3.05.
The budget committee of the Georgian parliament has said it expects the economy to shrink by 10.7% y/y in the second quarter, according to Business Media.
Georgia’s GDP increased by 1.5% y/y in Q1, but then shrunk by 2.7% y/y in March, according to a flash estimate of statistics office Geostat.
The country’s central bank has said that following declines in domestic and external demand, Georgia's real economic output would contract by around 4% this year.
According to a document drafted by the parliament;s budget committee, the expected GDP plunge in Q2 would be caused by the sudden decline of domestic demand—driven by the coronavirus (COVID-19) pandemic—which would have a negative effect of 14.8pp in the GDP dynamics, while net exports would contribute a positive 4.1pp, due to imports contracting more than exports.
The volume of private consumption was expected to decrease especially in non-food products and services, the committee reasoned.
Private investment would be sharply reduced, which, despite the government's investment activities, would significantly reduce total investment and the negative pace of economic activity.
"As a result of quantitative estimates of [assumptions] the volume of imports is expected to decrease more than exports and the net export component will determine the change in economic activity by + 4.1pp, while domestic demand (for consumption and investment ) will decrease significantly (especially due to declining private investment),” the budget office stated.
The Asian Infrastructure Investment Bank (AIIB) has approved a loan of €45mn to Georgia to mitigate economic and social impacts of the coronavirus (COVID-19) crisis and sustain the momentum of pre-pandemic reforms that support economic growth and resilience, the bank has announced.
While it is widely seen as having successfully addressed the pandemic to date, Georgia faces a sharp plunge in international tourism revenues and subdued external demand. Its economy is set to shrink by 4.8% in 2020 versus a total decline in the South Caucasus region of 3.1%, the World Bank said in early June in its updated Global Economic Prospects report. The International Monetary Fund (IMF) said in April that Georgia’s current account gap would hit 11.3% of GDP this year amid weak tourism revenues—since then the recovery outlook for the sector has deteriorated. Developments have put further pressure on the public deficit, seen in April by the IMF as heading for 8.5% of GDP .
12​ GEORGIA Country Report ​September 2020 ​ ​www.intellinews.com