Page 15 - GEORptJun18

Azerbaijani economy returned to growth in 2017, expanding by 0.1% y/y, following a sharp contraction of 3.1% in 2016.
Despite the fact that Azerbaijan is expected to begin gas exports from the giant Shah Deniz II field through a new network of pipelines to Turkey this year, its industry will nevertheless contract by 0.5%. In 2019, as the new gas export scheme becomes fully operational, export revenues will support industrial growth to the tune of 3%, the ADB forecasts.
The multilateral lender expects that higher incomes and a stabilised currency - the Azerbaijani manat has lost half of its value against he dollar since 2015 - will lead to a rise in private consumption. This trend will be accompanied by higher government spending on infrastructure to help meet demand for housing and higher exports.
Inflation will come down from the double digits, where it has been since 2015, to 7% in 2018 and 2019, according to the report, though monetary policy will remain tight in the next two years in order to curb inflation.
Georgia
Boasting the best performing economy in the South Caucasus in recent years, Georgia will continue to experience strong economic growth to the tune of 4.5% in 2018 and 4.7% in 2019, the ADB projects.
Industrial growth is forecast to reach 5.4% in 2018 and 5.8% in 2019, and will drive growth, together with a rebound in utilities and a strong performance in the construction sector. Agriculture, in the meantime, will expand only by 2.1% in 2018 and 3.7% in 2019 thanks to government support.
Meanwhile, pensions and capital markets reforms planned for the second half of 2018 will support growth by boosting savings and investment, as will anticipated reforms to upgrade infrastructure, improve public-private partnerships, promote trade integration and strengthen public procurement.
Inflation, which has plagued Georgia in recent years, is projected to come down to 3.5% in 2018, from over 6% in 2016-2017, and monetary policy is expected to ease in order to support growth. Fiscal policy will remain tight in order to contain the budget deficit at 1% of GDP in both 2018 and 2019, particularly as tax revenues as a percentage of GDP are expected to decline due to a recent corporate tax reform.
4.0 Real Economy 4.1 Industrial production
Industrial production rises 20.6% y/y in 4Q17
Georgia’s industrial production increased 20.6% in the fourth quarter of 2017, easing from a 21.8% growth in the previous period, according to the National Statistics Office of Georgia.
Production increased at a slower pace for both water supply sewerage, waste management and remediation activities (4% in 4Q17 from 12.4% in 3Q17) and electricity, gas, steam and air conditioning supply (9.8% in 4Q17 from 17.6% in
15 GEORGIA Country Report June 2018 www.intellinews.com