Page 5 - GEORptSep21

1.0 Executive summary
Georgia’s estimated real gross domestic product (GDP) growth rate in May amounted to 25.8% y/y, while for January to May it was 11.5%, according to a rapid estimate by national statistics office Geostat.
May saw growth, year on year, in almost all sectors. Significant contributions were observed in manufacturing, financial and insurance activities, trade, real estate activities, hotels and restaurants, construction, transportation and storage. The Georgian economy shrunk by 6.2% in 2020.
TBC Capital has updated its growth forecast for 2021, projecting a 10.5% economic advance. According to the bank, despite the low rate of coronavirus vaccination at the moment in the country, a strong economic recovery is expected. The economy will expand by another 6.5% in 2022 and 5.5% in 2023, according to TBC’s revised model.
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 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.
The Georgian government has announced new coronavirus restrictions that will apply between August 14 and September 4 to curb the spread of coronavirus. Georgia reported 5,128 new cases of coronavirus, 3,310 recoveries and 49 deaths in the past 24 hours.
Georgia’s consumer price inflation came in at 9.9% year on year in June, a major 2.2pp rise from 7.7% y/y in the previous month, according to Geostat. Notably, the national currency has strengthened significantly in June versus the US dollar, to 3.16 GEL to USD from 3.38 in May and 3.44 in April, easing the pressures exerted by expected inflation.
Galt & Taggart has forecast that the country's average inflation rate will be 8.3% this year. This is 1pp above the forecast lately put out by the International Monetary Fund (IMF) and suggests that the central bank may have to further hike its key refinancing rate. It already stands at 9.5% following two hikes this year. The main drivers for a sharp rise in inflation as seen by
5 GEORGIA Country Report September 2021 www.intellinews.com