Page 15 - GEORptOct21

3.2 Macro outlook
Moody’s expects Georgian economy to grow 7.3% in 2021
IMF optimistic on Georgia’s recovery but recommends caution
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," said the ratings agency.
To note, Moody's lately affirmed the government of Georgia's Ba2 local and foreign currency long-term issuer ratings and foreign currency senior unsecured rating. The outlook remained stable.
The International Monetary Fund (IMF) has doubled its forecast for Georgia’s economic growth this year from the 3.5% envisaged in April to a buoyant and slightly optimistic 7.7%. The forecast was issued under the Article IV Consultations with the South Caucasus country.
The Fund expects the economic rebound to help the government bring public debt down from over 60% of GDP, the level it surged to during 2020 when the country borrowed heavily to offset shrinking tourism revenues amid the coronavirus crisis. Thus, the public debt to GDP ratio (60% at the end of 2020) should drop to 55.3% of GDP at the end of the year, compared to a slight
15 GEORGIA Country Report October 2021 www.intellinews.com