Page 16 - GEORptJun22

EBRD expects 30% GDP contraction in Ukraine in 2022, lowers emerging Europe projections
Bank.
On the external side, due to weaker exports and higher import prices, Georgia’s current account deficit was expected to widen, the World Bank said, adding: “Lari volatility has also increased following the onset of the war. Due to higher commodity prices and regional supply disruptions, inflationary pressures are likely to increase. This may be mitigated partly by long-term fixed price contracts for gas supply and a shared border with Russia that will maintain basic supply flows.
“On the upside, recent developments provide an opportunity for Georgia to strengthen the transit potential of the Caucasus Transport Corridor. The conflict in Ukraine will also likely have significant impact on poverty and vulnerability through the tourism, remittances, and higher energy and food prices (especially wheat) channels.”
Georgia, noted the IFI, was well placed to manage the economic fallout of the war. “Buffers remain reasonable; the macro-financial framework is credible; and the banking sector is entering the crisis in relatively strong shape, albeit with the vulnerability of high dollarization. Fiscal discipline has been maintained over the past decade, although planned post-COVID consolidation may decelerate due to the economic slowdown. Still, government deposits are sizeable, and debt is likely to remain below the 60 percent statutory level under the fiscal rule,” the World Bank concluded.
A severe contraction now expected at 30% this year in war-torn Ukraine has dragged down the European Bank for Reconstruction and Development's (EBRD) projection for growth across its area of operations in 2022 to just 1.1%.
The development bank has issued two new sets of projections since Russia invaded Ukraine in February, which has had a negative impact across most of the emerging Europe and southern and eastern Mediterranean (Semed) regions.
In its latest Regional Economic Prospects report issued on May 10, the EBRD has lowered its forecast for the region as a whole by 0.6 percentage points (pp) compared to its previous projections in March, and by 3.1pp compared to November 2021.
16 GEORGIA Country Report June 2022 www.intellinews.com