Page 16 - GEOGRptJun19

Georgia’s central bank baseline scenario sees 5% GDP growth across 2019-2021
World Bank sees robust, steady 5% GDP growth in Georgia from 2018 to 2021
Risks to the outlook were mainly on the downside, including weaker growth among trade partners, global trade tensions and a sharper-than-projected credit slowdown.
The IMF commended the authorities for advancing structural reforms and stressed the need for continued efforts to promote inclusive growth and higher economic resilience to external shocks. The authorities have introduced measures to limit household indebtedness and revised the fiscal rule. They are also progressing toward a new insolvency law, a more automated VAT refund system, and a strengthened banking resolution framework.
Georgia’s GDP will rise by 5% per annum during 2019-2021, under a baseline scenario published by its central bank.
Headline inflation will hover around 3% p.a. under the baseline scenario (2.9% in 2019), allowing the regulator to ease its policy rate by 0.5pp in 2019 and 2020 and by 0.25pp in 2021. The nominal Georgian lari exchange rate versus the US dollar will remain steady, resulting in the currency strengthening in real terms.
Under a scenario with a negative external shock formulated by the central bank, Georgian GDP would only rise by 2% in 2019, 2.5% in 2020 and 3.5% in 2021. Under a compiled strong demand scenario, the growth rate would accelerate to 6% in 2019 and gradually ease to 5% in 2021 .
The World Bank has revised its estimate for Georgia’s GDP growth in 2018 upwards to 5% from the 4.2% it anticipated last June. It added in the latest edition of its Global Economic Prospects report, released late on January 8, that it now expects the country to maintain the same robust growth rate from 2019 to 2021.
The revised outlook is slightly more optimistic for 2019, as it adds 0.2pp to the growth expectation versus the June 2018 forecast.
Among the risks, the World Bank spots possible spillover effects from Turkey’s economic downturn via the flow of FDI to Georgia.
The International Monetary Fund in its latest World Economic Outlook issue, released last October 9, revised its forecast for Georgia’s 2018 GDP growth to 5.5% from the 4.5% it projected in April. Independent projections put the country’s expected growth this year at above 6%, but caution is shown when it comes to possible strengthening adverse effects stemming from the Turkish
16 GEORGIA Country Report June 2019 www.intellinews.com