Page 19 - GEORptOct22

More pain stored up for Emerging Europe in 2023
investment management, and progress in developing a support scheme for renewable power generation. It said that successful implementation of these reforms would limit fiscal risks and enhance the economy’s resilience over the medium term.
It also highlighted that successful implementation of fiscal structural reforms and continued vigilance against inflation would enhance the resilience of the Georgian economy over the medium-term.
The execution of the 2022 budget appears on track and revenue collection is higher than expected, it said, but saving additional revenue would strengthen fiscal cushions and help contain inflation pressures. The IMF said it was important to ensure compliance with the fiscal rule, in line with the path envisaged under Georgia’s IMF-supported programme.
In June, the executive board of the IMF approved a $280mn stand by arrangement for Georgia, a programme that the government sees as precautionary.
There is more pain ahead for Emerging Europe as government efforts to shield populations from the energy crisis and rampant inflation since Russia’s invasion of Ukraine have shifted the worst of the economic impact to next year, said the European Bank for Reconstruction and Development (EBRD) as it downgraded GDP growth forecasts for 2023 across most of the region.
The EBRD’s current forecasts for growth across its countries of operations in Emerging Europe and the Southern and Eastern Mediterranean (SEMED) are 2.3% in 2022 and 3% in 2023. The development bank thus lifted its projection for 2022 by 1.2 percentage points (pp) but lowered its 2023 forecast by 1.7 pp compared to its last set of forecasts issued in May.
It also warned that the forecasts in its latest Regional Economic Prospects report, published on September 28, are subject to major downside risk should Russia’s war in Ukraine escalate or the volume of its gas exports fall further.
Commenting on the changes to its forecasts since May 2022 at a presentation of the report on September 28, EBRD chief economist Beata Javorcik described the region’s economic performance in the first half of 2022 as “surprisingly strong”, attributed to a large extent to consumers using savings accumulated during the coronavirus (COVID-19) pandemic. Exports also remained at a high level.
“However, the boom [is] coming to end as the impact of the energy crisis, high inflation and uncertainty caused by the war are putting brakes on the economies,” Javorcik added.
“We revised upwards our forecasts for 2022, but it now looks bleaker for 2023. We are in for a hard and cold winter.”
At the same time, inflation has been soaring, and averaged 16.5% across the EBRD regions in July – higher than at any time since 1998. More price rises are anticipated.
“Inflation does not seem to have peaked yet. In many countries high energy costs have not translated into retail prices paid by households. That means that when governments stop helping out to keep prices low, if energy prices
19 GEORGIA Country Report October 2022 www.intellinews.com