Page 13 - GEORptMar20

Import growth remained broadly flat despite robust domestic demand, while exports increased by 12% year on year.
Despite higher policy rates (in the second part of the year), credit growth was sustained, partly supported by lower foreign exchange reserve requirements. Strong revenue growth brought public investment to a record high (8% of GDP) without increasing the fiscal deficit (2.1% of GDP).
After reaching 7% y/y at end-2019, inflation declined to 6.4% y/y in January. The IMF estimates that Geoergia’s growth outlook for 2020 remains stable, at 4.3%, but risks are now balanced due to higher-than-envisaged economic activity in 2019.
Inflation is projected to converge to the 3% target by end-2020 due to tightened monetary policy and as the impact of one-off effects dissipate. The uncertain global outlook calls for continued exchange rate flexibility, reserve buildup and prudent macroeconomic policies. The team welcomes the authorities’ continued commitment to maintaining a tight monetary policy, for as long as needed, and a responsible fiscal policy.
The 2020 budget appropriately targets a neutral fiscal stance. The fiscal deficit is anticipated to increase slightly, to 2.4% of GDP.
The Fund’s team welcomes the authorities’ efforts to accelerate VAT refunds by introducing an automatic repayment system; and steps to finalise the public-private partnership framework and improve the management of state-owned enterprises, so that the authorities remain vigilant against a build-up in fiscal risks.
3.2 ​Macro outlook
Major investment bank G&T sees Georgia’s 2020 GDP growth at 4.7%
Major investment bank in Georgia Galt & Taggart (G&T) expects the country to see growth of 4.7% growth in 2020, Lasha Kavtaradze, head of macroeconomics analysis and forecasting at the bank told Businiss Media in an interview. ​He pointed to the benefits of foreign inflows, such as from remittances and tourism, and fiscal stimulus and expected monetary loosening to also be among the drivers.
The World Bank anticipates Georgia will record a GDP gain of 4.3% in 2020, according to the latest edition of its Global Economic Prospects report issued on January 9. The International Monetary Fund (IMF) has projected 4.3%. Kavtaradze predicted that the government's infrastructure spending would also be focused on economic growth, with monetary policy tightening in the second half of the year expected to slow.
“Revenue from external sources will be an important factor in sustaining consumer demand and hence having a positive impact on economic growth. In terms of investment we see that the growth of lending to companies by the banking sector was significant in 2019. It is expected that growth will continue in 2020. Finally, a tighter monetary policy in light of the increased demand for foreign currencies, especially the euro on loans [will have an impact],” said Kavtaradze.
On the fiscal side, Kavtaradze said there was significant support for economic growth in 2019.
13​ GEORGIA Country Report​ March 2020 ​​www.intellinews.com