Page 5 - GEORptAug20
P. 5
1.0 Executive summary
The economic decline in Georgia this year will be in the range of 3%-6%, investment bank Renaissance Capital has said after assessing the impact of the coronavirus (COVID-19) crisis on the country’s economy. However, it stated that the rate of decline would depend on the size of the second wave of COVID-19 that hits the country.
Georgia will generally permit the resumption of regular international flights from August 31, with exceptions allowing the routes to Paris, Riga and Munich to be restarted earlier in the month, the Georgian Civil Aviation Agency announced. Georgia has opened its borders unconditionally for Germany, France, Latvia, Lithuania and Estonia. The country is on the European Union's recently updated list of countries for which travel restrictions should be lifted. Georgia has lifted most of its restrictions imposed to contain the spread of COVID-19 in June.It has re-opened shops, hotels, restaurants and cafes, while restoring public and inter-city transportation. Hotel owners and tour operators remain, however, pessimistic about the outlook for the nation’s tourism industry this summer.
The Asian Infrastructure Investment Bank (AIIB) has approved a loan of €45mn to Georgiato mitigate economic and social impacts of the coronavirus (COVID-19) crisis and sustain the momentum of pre-pandemic reforms that support economic growth and resilience, the bank has announced.
While it is widely seen as having successfully addressed the pandemic to date,
Georgia faces a sharp plunge in international tourism revenues and subdued external demand. Georgia’s GDP contracted by 12.6% y/y in Q2 following the modest 2.2% y/y advance recorded in Q1.The country thus suffered a 5.8% y/y contraction in growth in H1.Its economy is set to shrink by 4.8% in 2020 versus a total decline in the South Caucasus region of 3.1%, the World Bank said in early June in its updated Global Economic Prospects report.
The International Monetary Fund (IMF) said in April that Georgia’s current account gap would hit 11.3% of GDP this yearamid weak tourism revenues—since then the recovery outlook for the sector has deteriorated. Developments have put further pressure on the public deficit, seen in April by the IMF as heading for 8.5% of GDP.
With key parliamentary elections in October, Georgia’s government cannot risk a coronavirus (COVID-19) epidemiological deterioration that would go down badly with the electorate, while keeping the borders closed could equally expose it to criticism from the opposition for deep impacts on the economy.
As regards monetary policy, Renaissance Capital predicted that by the end of the year, Georgia’s central bank would continue to reduce its refinancing rate. The National Bank of Georgia (NBG) has cut its refinancing rate by 25bp to 8.25%in a visible attempt at balancing the deterioration in Georgia’s current account outlook.
Periodic currency interventions by the national lender would continue, it added. The central bank has emphasised that its monetary policy will remain tight in
5 GEORGIA Country Report August 2020 www.intellinews.com
