Page 5 - GEORptOct21

1.0 Executive summary
Georgia's economy expanded 12.0% year-on-year in the first eight months of 2021, compared with a 5.6% drop in the year-earlier period, preliminary government data showed on September 30. The gain came as the ex-Soviet republic recovered from the pandemic's fallout.
The country’s estimated real GDP growth rate in Q2 amounted to 29.9% y/y to total GEL 15.91bn, according to the national statistics office Geostat. Q2 2021 saw growth, year on year, in almost all sectors. Significant contributions were observed in wholesale and retail trade; manufacturing; arts, entertainment and recreation; transport and logistics; construction; accommodation and meals; and financial and insurance activities. The Georgian economy shrunk by 6.2% in 2020.
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, underpinned by fiscal policy support to consumption in 2021 and signs of steady rebound in regional tourism. 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.
The International Monetary Fund (IMF) 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 to 55.3% of GDP at the end of the year, compared to a slight deterioration (60.8% of GDP) envisaged under the previous forecast in April.
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 (to 9.9% of GDP) compared to its elevated 2020 level, according to the IMF.
All such optimistic scenarios depend on a tourism recovery, which in turn is sensitive to the health situation globally. 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.
Georgian health officials are alarmed and concerned by the recent low vaccination rate that would lead to a high number of deaths when the new wave of the virus started. Georgia reported 662 new cases of coronavirus, 3,534 recoveries and 34 deaths in the past 24-hour cycle..
Georgia’s annual inflation, at 12.8% in August, was higher than expected compared to 9.9% y/y in June. The driving forces of high inflation are still predominately one-off and independent from monetary policy. According to preliminary estimates, the contribution of such exogenous factors to headline inflation is about nine percentage points, the National Bank of Georgia (NBG) said.
5 GEORGIA Country Report October 2021 www.intellinews.com