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Georgia think tank sees 8% GDP decline and 17.7% unemployment in “least pessimistic” scenario
“unprecedented uncertainty,” it added.
“If social distancing remains in place for much longer than anticipated, the recession may be much deeper, with the 2019 levels of output per capita not attained again for years to come,” the development bank noted.
The EBRD’s projection for Georgia is slightly more pessimistic than the Georgian government’s baseline scenario (-4%, in line with the International Monetary Fund projection) assumed for budget planning. Investment bank Galt & Taggart has concurred that Georgia is set for a 4% GDP decline in 2020 as projected by the IMF. Also, for comparison, Georgia’s GDP growth is forecast by Fitch Ratings to contract by 4.8% in 2020.
The EBRD’s revision in the case of Georgian economic output was among the steepest issued for countries it invests in and the incomplete recovery envisaged for next year also lags behind the average across those nations. The cause might stem from the country’s strong reliance on tourism.
The downward revision for this year’s GDP dynamics foreseen in the case of Georgia is 10pp, wider than the 6.5pp average for the EBRD countries, but several countries (including Armenia, Moldova and Ukraine) saw wide revisions as well in the area of 8-8.5pp.
As regards the expected recovery next year, which naturally is subject to even higher uncertainty than the GDP projection for this year, Georgia’s GDP nearly returning to the 2019 benchmark level (-0.3% in 2021 versus 2019) is calculated as a weaker performance compared to the EBRD countries average (+1.1% in 2021 compared to 2019), but it is in line with the expected performance of neighbours in Eastern Europe and the South Caucasus.
Georgian think tank PMC Georgia Research has estimated in a report that the country’s GDP will drop by 8% this year under a baseline (“least pessimistic”) scenario, while it would plunge by 12.9% under the “pessimistic” scenario.
Weaker tourism and remittances are two drivers hitting the country’s economy. In March, compared to March 2019, the number of tourists coming to Georgia decreased by 56.1%, while remittance inflows dropped by 9%. Further declines in these figures are expected in the coming months.
The government, in line with the International Monetary Fund (IMF), projected a 4% GDP decline this year, which corresponds to the “optimistic” scenario drafted by PMC Research.
If the optimistic scenario holds true, Georgia’s real economy is expected to shrink by 4.3%, a more severe decline than seen in 2009 (-3.7%), the report read.
Regarding the average unemployment rate in 2020, in the optimistic scenario, PMC Research expected a rate of 14.1% (up from 11.6% in 2019), while for the less pessimistic scenario the figure would be 17.7% and for the very pessimistic scenario 22.7%.
Additionally, it is likely that the negative impact of the coronavirus (COVID-19) pandemic will change the structure of the labour force in Georgia. The
18 GEORGIA Country Report June 2020 www.intellinews.com
