Page 16 - GEORptDec19
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World Bank cuts outlook on Georgia’s GDP amid Russian sanctions and weak regional context
ADB cuts 2019 and 2020 growth outlooks for Georgia on modest private investment projects
Kahkonen praised Uzbekistan’s economic reforms: “Once it’s clear that the reforms are cemented and are there to stay, there would be a tremendous interest ... but there is a long way to go.”
He also praised reforms amid Armenia and Georgia’s favourable business climates.
The World Bank (WB) has cut its forecast for the advance of the Georgian economy in 2019, reducing its growth prediction by 0.2pp to 4.4% for this year and deciding on a deeper 0.5pp cut in its medium-term 2020-2021 outlook, according to its Europe and Central Asia Economic Update for autumn 2019, released on October 9. Sanctions from Russia would reduce GDP by 0.6%, it estimated.
Georgia’s GDP would decelerate to 4.3% next year, it added, assuming a full-year impact of Russian sanctions—which might be lifted sooner than expected, recent statements have indicated. A stronger 4.5% growth rate for Georgia is seen by the institution for 2022.
A flight ban imposed by Russia in July will take 0.6% of Georgia GDP this year, the World Bank said. Tourism revenues amount to as much as 20% of Georgia’s GDP and the number of visitors arriving in the country from Russia dropped by 20% y/y in September, following a decline that looked softer in the first two months after the ban was enforced. Stronger net exports, a recovery in credit growth and some fiscal stimulus will only partly offset Georgia’s loss incurred due to the Russian sanctions, the update added.
In its 2020 growth projection, the World Bank sees delays in several larger planned infrastructure projects and an easing of credit growth as international financial markets tighten.
Some 57 state-owned enterprises classified as high-risk have accumulated liabilities in the amount of 16% of GDP, the report noted. The government’s energy purchasing agreements are also seen as presenting fiscal risks.
The Asian Development Bank (ADB) has cut its 2019 growth outlook for Georgia to 4.7% from 5.0%. Also, in its Asian Development Outlook 2019 Update released on September 25, the ADB changed its anticipated 2020 GDP expansion for the South Caucasus country from 4.9% to 4.6%.
The reductions were attributed to the country’s modest outlook for growth in private investment.
The ADB’s revised 2019 inflation forecast for Georgia is 4.3% (previously seen at 3.2%) while the year’s current account balance as a share of GDP is now anticipated at -7.3% (previously -7.9%). For 2020, inflation is predicted to be 3.5% (previously 3.0%) and the current account balance as a percentage of GDP is anticipated at -7.1% (previously -7.8%).
The report added: “Growth is estimated at 4.9% in the first half of this year, down from 5.4% in the same period of 2018 but outperforming last year as a whole. In services, an 8.1% expansion reflected gains in tourism, trade, transport, health, and education.
The report also stated: “The potential risks to the economic prospects include regional geopolitical tension. Average inflation accelerated to 3.6% in the first
16 GEORGIA Country Report December 2019 www.intellinews.com
