Page 5 - GEORptOct19
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1.0 Executive summary
Georgia’s economic growth remained robust at 5.8% y/y in August following the record 6.1% y/y advance in July, according to estimated data released by statistics office Geostat. The figure put the average GDP growth in the first eight months of the year at 5% y/y. After the annual expansion eased from 4.9% y/y in Q1 to 4.5% y/y in Q2, it accelerated in July-August, setting the grounds for an overall bright performance in Q3.
The outlook for the country, although firm, saw a slight downward adjustment in the regional context with the central bank’s rate hikes supporting such a perspective.
The Asian Development Bank (ADB) on September 25 cut its 2019 growth outlook for Georgia to 4.7% from 5.0%. Also, in its Asian Development Outlook 2019 Update, the ADB changed its anticipated 2020 GDP expansion for the South Caucasus country from 4.9% to 4.6%.
Georgia’s tourism revenue declined by 10% y/y in August, Georgia Today reported citing a press release from the central bank. The country’s tourism sector has been in the spotlight since Russia in late June introduced some soft restrictions deterring Russians from holidaying in the country amid diplomatic tensions over anti-Moscow protests.
Georgia's exports performed particularly well, helped by the local currency's slight weakening over the past several months. Further exchange rate corrections in August should provide stability to exports. Georgia's exports rose by 17.4% y/y to $323mn in July, while imports, although contracting by 4.3% y/y, stood at more than twice that, namely $762mn.
Georgia’s foreign trade deficit narrowed in annual terms for the ninth month in a row, clocking a gain of 15.9% y/y in July, according to data published by Geostat. The weakening of the country’s local currency, visible since the second half of last year, partly contributed to an improvement in the external balance that still accounts for some one-third of Georgia’s GDP.
Georgia’s consumer price index (CPI) accelerated to 4.9% y/y in August from 4.6% in the month before as food prices keep rising fast. Consumer prices likely came under pressure because the local currency weakened further prompting a central bank intervention to keep the lari above the psychologically important threshold of GEL 3 to the dollar.
Georgia’s central bank summoned an extraordinary meeting on September 25 to hike the refinancing rate for the second time this month. It was raised by 50bp to 7.5%. Georgia is targeting 3% inflation, but actual inflation was 4.9% in August.
On the banking front, in the first half of 2019, profits dropped for seven out of 15 commercial banks registered in Georgia and the aggregate net profit of the banking system decreased by 10% y/y to GEL361mn ($124mn), according to a report of the National Bank of Georgia. Some 96% of the profits was realised by the two largest banks: TBC Bank and Bank of Georgia.
5 GEORGIA Country Report October 2019 www.intellinews.com
