Page 5 - GEORptMar20
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1.0 Executive summary
Georgia’s GDP growth in January stood at 5.1% y/y, according to preliminary data released by statistics office Geostat on March 2. The Georgian economy expanded by 5.2% in 2019, accelerating from the 4.8% seen in each of the previous two years. The growth rate eased to 3.8% y/y in December, according to the statistics office’s rapid estimate.
According to Geostat, a substantial increase in exports positively influenced GDP growth. In January, the country’s exports increased by 10% y/y to $262.6mn, while imports also increased, but by only 4%. Nonetheless, the trade gap remains wide as imports are more than double exports.
Growth was observed in the following sectors: transportation and warehousing; construction and real estate; accommodation and food supply; wholesale and retail trade; repair of motor vehicles and motorcycles; information and communication; electricity, gas, steam and air conditioning supply and the processing industry.
Major investment bank in Georgia, Galt & Taggart (G&T), expects the country to see growth of 4.7% in 2020 amid “fiscal acceleration during elections”, while the World Bank remains on the conservative side—it anticipates Georgia will record a GDP gain of 4.3% this year, according to the latest edition of its Global Economic Prospects report issued on January 9.
Georgia’s volume of FDI, expressed as a percentage of GDP, is indeed impressive even though it has shrunk compared to recent years. However, its structure is dominated by the re-invested earnings of the country’s two major banks. Foreign direct investment (FDI) in Georgia increased by 13.7% y/y to $417mn in the third quarter of this year against a trend that was generally downwards.
Georgia’s consumer price index (CPI) stood unchanged at 6.4% in February. The country’s inflation level peaked at 7% y/y in December. It is expected to drop to 3% by the end of the year as one-off effects seen last year, largely from tobacco excise duty, phase out. Georgia’s central bank at its January 29 board meeting maintained its refinancing rate at 9% and said that monetary policy would remain tight until medium-term inflation expectations declined to the 3% target.
Meanwhile, Fitch Ratings has affirmed the rating for Georgia's long-term foreign currency debt at ‘BB’ with a stable outlook, pointing to governance and business environment indicators above the current medians of category peers and a track record of macroeconomic resilience against regional shocks. The strengths are balanced by government debt's significant exposure to foreign-currency risk, high financial dollarisation and external finances that are significantly weaker than the majority of category-rated peers, the agency said.
Georgia's current account deficit (CAD) in 2019 reached a historical low of 4.5% of GDP by Fitch estimates; largely on account of a smaller trade deficit as a result of weaker export growth and contraction in imports. The rating agency forecasts the CAD will reach 4.1% in 2020 and 4.2% in 2021, still significantly wider than the median 2.6% of BB category peers.
5 GEORGIA Country Report March 2020 www.intellinews.com
