Page 12 - bne IntelliNews Georgia country report November 2017

3.2 Macro outlook
IMF revises growth forecast for Georgia to 4.3%
World Bank forecast a mixed bag for South Caucasus
An International Monetary Fund (IMF) mission to Georgia that ended on October 9 has concluded that the country's economy is set to grow by 4.3% this year and that the lender will disburse another tranche of its IMF loan, with the payment amounting to $42.3mn.
Boosted by higher-than-expected tourism receipts, exports and investments in infrastructure and transport, the Georgian economy has exceeded most growth forecasts this year. The IMF itself has had to revise its forecast from 3.5% to 4.3%.
Vera Marin, head of the mission to Georgia, said in a statement: “Georgia’s economic reform program is off to a strong start. All quantitative performance targets for end-June were met, most by large margins. The economy has grown faster than expected this year due to prudent policies and stronger economic activity in Georgia’s main trading partners. Growth has been revised upwards to 4.3 percent in 2017 from 3.5 percent, supported by exports, tourism, and investment. The current account balance is projected to narrow to 10.4 percent of GDP in 2017, from 12.8 percent of GDP in 2016. Economic growth is expected to strengthen over the medium term with continued implementation of the economic reforms."
The government's efforts directed at fiscal responsibility have rendered results, Marin argued, thanks to high revenues and spending that had been contained, allowing for higher capital spending and repayment of VAT credits. The fiscal deficit is projected at 3.6% of GDP in 2017.
In the statement, Marin also spoke about the IMF's discussions with Tbilisi about the 2018 budget, which is expected to strike a balance between fiscal responsibility and capital investments; monetary policy, which she deemed adequate; and the financial sector, the oversight of which the Georgian government plans to strengthen.
The latest World Bank report on Europe and Central Asia published on October 19 amounts to a mixed bag of forecasts for the three countries in the South Caucasus - steady economic recovery in the case of Armenia, strong in the case of Georgia and slow in the case of Azerbaijan.
Driven by construction and tourism, Georgia's economic growth accelerated to 4.9% in the first half and it is expected to exceed 4% per year in the next two years. The economy has been driven by export growth to the tune of 30% y/y, by a 20% increase in remittances and by public investment.
A 32% boost in capital expenditure, particularly on infrastructure, supported growth during this period. Based on a draft of the 2018 budget, which is still being debated in parliament, Tbilisi intends to further increase infrastructure spending next year.
Looking ahead, Georgia's economic performance will remain contingent on a series of structural reforms that the government has initiated to create favourable conditions for private investment, increase productivity and boost export competitiveness.
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