Page 20 - GEORptJun20

ADB cuts forecast for Georgia’s GDP as tourism revenues plunge
On top of this, G&T said that it was more optimistic on remittances, which declined less than it projected in March, when they were down 9% y/y). The investment bank added that it expected a 10% decline in remittances for the whole of 2020, versus its initial forecast of 15-20%, made on March 25.
Georgian authorities have said that they have mobilised $3.0bn financing from IMF and other international partners to respond effectively to the COVID-19 pandemic and the associated economic crisis. Out of this funding, $1.5bn is earmarked for the public sector and $1.5bn for the private sector.
The Asian Development Bank (ADB) has slashed its 2020 economic growth forecast for Georgia to 0% from 4.6%—the outcome it predicted last September—with the impacts of the coronavirus (COVID-19) pandemic and monetary tightening constraining consumption and limiting tourism and trade expansions. ​The development bank gave its latest forecast in its​ O​ utlook 2020​ ​report published on April 3.
Higher domestic demand fuelled by increased bank credit available to Georgian households, expanded foreign direct investment and a rebound in workers’ remittances and stronger tourism activity are expected by the development bank to drive a recovery in 2021, a year in which it sees Georgia’s economy growing by 4.5%.
Risks to economic growth include greater than expected sluggishness in trading partners’ economies, weaker than expected domestic demand, slower growth in tourism revenues and tighter liquidity in global financial markets, in part reflecting the impact of COVID-19.
Gains in retail trade and higher government education spending are projected to prop up the services sector to rates of 1.1% growth in 2020 and 6.3% in 2021—with hopes for a recovery in tourism reflecting in the stronger projection for 2021. The industry is seen by the ADB as contracting by 3.1% in 2020 with slowdowns in construction and manufacturing before rebounding to 2.1% in 2021 with higher mining output. Agriculture is forecast to decline marginally by 0.7% in 2020 and expand by 0.4% in 2021 as investments in the sector strengthen.
Fiscal policy is seen by the ADB as expansionary with the budget deficit projected to widen somewhat to 2.5% of GDP in both 2020 and 2021. This reflects phased increases in the basic pension and a gradual rise in education outlays to 6.0% of GDP. Public debt is expected by the bank to increase to 48.5% of GDP in 2020 and 49.5% in 2021 in part from the need to continue financing infrastructure projects.
Georgia’s external prospects will depend heavily on developments seen by its trading partners, the ADB said. The current account deficit is projected to narrow further, to 4.4% of GDP in 2020 and 4.2% in 2021, with a continued decline in imports as much lower oil prices help trim the trade deficit by 2.5% in 2020 and 0.5% in 2021. Exports are projected to grow by 3.6% in 2020 and 11.9% in 2021, with modest domestic expansion and higher foreign direct investment raising imports by 1.1% in 2020 and 7.0% in 2021.
20​ GEORGIA Country Report ​June 2020 ​ ​www.intellinews.com