Page 18 - GEORptAug21

EBRD forecasts 4.5% GDP growth in Georgia in 2021, 5.5% in 2022
ADB expects Georgia’s GDP to expand 3.5% in 2021 and 6% in 2022
use windfall budget revenues more prudently (as against how it has acted under the recent budget revision, still under debate in parliament) in order to create fiscal space.
“As the recovery proceeds, the focus of fiscal policy should shift toward unwinding crisis support measures and bringing down the deficit and debt,” the Fund advised.
It also recommended that the central bank to remain vigilant and address any inflationary pressures generated by the economic recovery, if necessary by further hiking the refinancing rate (already at 9.5%).
“With recovery now faster than expected, risks to inflation are tilted to the upside, and the NBG should be ready to promptly hike rates further if inflation expectations or core inflation suggest high inflation risks becoming entrenched,” the Fund concluded.
The European Bank for Reconstruction and Development's (EBRD's) June 2021 Regional Economic Prospects report forecasts GDP in Georgia will grow by 4.5% in 2021.
That will be welcome news for the country, the GDP of which contracted by 4.5% in Q1 2021.
The EBRD had this to say on Georgia's continuing economic recovery:
"The Georgian economy is demonstrating signs of strong recovery. As one of the most tourism-dependent countries in the EBRD regions, Georgia’s economy was strongly hit in 2021 by border closures and health measures around the world. Tourism revenues were slashed by 83% in 2020, leading to a 38% decline in the exports of goods and services. Investment contracted on the back of uncertainty and adverse conditions in the economy. However, household consumption demonstrated resilience despite the two lockdowns and grew by 5.4%. Overall GDP contracted by 6.2% in 2020.
"Sustained access to external financing enabled the authorities to cover the rising fiscal and external gaps while at the same time maintaining international reserves at record levels of US $4.2 billion in May 2021. Remittances grew by approximately 30% in the first quarter of 2021 and goods exports expanded by 20% in current US$ terms in the first four months (both in year-on-year terms), driven in large by rising demand from the near region and China. Tourism is slow to return so far, however.
"Inflation reached 7.7% year-on-year in May 2021 because of the pass-through effect of last year’s depreciation, prompting the National Bank of Georgia to raise the refinancing rate two consecutive times, from 8% in February 2021 to 9.5% in May 2021. GDP is expected to grow by 4.5% in 2021, and by 5.5% in 2022. A revival of the hospitality sector remains the main driver of overall economic recovery, while major risks stem from the slow rate of vaccination."
In its Asia Development Outlook (ADO) 2021, the bank’s main annual economic publication, ADB also projected that Georgia’s GDP growth would accelerate to 6% in 2022 as the full reopening of the economy and the expected recovery in tourism boost travel and commerce.
“As a tourism-dependent economy, the gradual lifting of pandemic-related restrictions should revive the country’s growth this year and accelerate it in
18 GEORGIA Country Report August 2021 www.intellinews.com