Page 16 - GEORptOct21

deterioration (60.8% of GDP) envisaged under the previous forecast in April. Georgia’s public debt to GDP ratio rose by 20pp during 2020.
“Robust growth in remittances and exports, and early signs of a faster than expected rebound in tourism have supported the recovery and should contribute to a narrowing of the current account deficit compared to its elevated 2020 level,” the IMF Concluding Statement read.
The current account deficit improvement projected by the Fund, to 9.9% of GDP from 12.5% of GDP in 2020, is significant but will not bring the country into safe territory.
The National Bank of Georgia (NBG) said growth might be even stronger.
The central bank will revise its forecast by the time of its August 4 monetary policy meeting and the figure might exceed 8%, NBG president Koba Gvenetadze announced. The government operated the first budget revision based on 7.7% GDP growth - and it revised the target budget deficit from 7.6% of GDP to 6.9% of GDP.
All such optimistic scenarios depend on a tourism recovery, which in turn is sensitive to the health situation globally. The recent deterioration in this regard may indicate that part of the risk mentioned by the IMF is actually going to materialise.
“New Covid-19 variants or vaccination delays could derail the recovery by requiring new lockdowns and reducing external demand, underscoring the paramount importance of controlling the pandemic,” the Fund cautioned. And the tourism recovery is still fragile.
In June 2021, a record number of tourists visited Georgia compared to all months since the start of the pandemic – 146,600, according to local authorities. This was 287% more than in June last year when the country was almost completely closed to visitors. But this was also 80% less than in June 2019. In 2019, which amounted to a record tourism year for Georgia, more than 9.3mn foreigners visited the country. In 2020, after the start of the pandemic, the number of visitors fell by more than 90%.
Significant downside risks remain and contribute to an outlook that is more uncertain than usual, the Fund acknowledged, urging Georgia to increase its coronavirus vaccination rate.
In terms of economic policies, the Fund recommended that the government use windfall budget revenues more prudently (as against how it has acted under the recent budget revision, still under debate in parliament) in order to create fiscal space.
“As the recovery proceeds, the focus of fiscal policy should shift toward unwinding crisis support measures and bringing down the deficit and debt,” the Fund advised.
It also recommended that the central bank to remain vigilant and address any inflationary pressures generated by the economic recovery, if necessary by further hiking the refinancing rate (already at 9.5%).
“With recovery now faster than expected, risks to inflation are tilted to the
16 GEORGIA Country Report October 2021 www.intellinews.com