Baku, Azerbaijan, July 29
By Tamilla Mammadova – Trend:
Growth in the South Caucasus subregion is projected to strengthen by 4.2 percent in 2021 compared to 2.6 percent in 2018, assuming continued implementation of domestic reforms and infrastructure investment, World Bank (WB) told Trend.
“Activity in the region’s largest economy, Azerbaijan, will be boosted by a new natural gas pipeline coming on stream, although this will be partly offset by the effects of weak credit growth arising from problems in the financial sector. In Georgia, growth is expected to firm, partly on account of increased government investment”, said the Bank.
According WB, growth in Georgia is projected to strengthen from 4.6 percent in 2019 to 4.8 percent in 2020 and by 5 percent in 2021.
Noting the impact of the devaluation of the lari on the economy of Georgia, the bank said a flexible exchange rate regime is an important element of Georgia’s macroeconomic policy framework, which will allow the economy to more easily adjust to shocks.
As reported, Georgia’s experience is generally positive, with the current account deficit narrowing considerably in recent years and official reserves increasing. Still, the significant dollarization of the economy makes the adjustment process a bit more challenging.
“A weaker lari could push up inflation and affect the purchasing power of economic agents. In addition, with significant share of debt in the public and the private sector denominated in foreign exchange, depreciation of the lari could increase the debt burden. However, Georgia’s macroeconomic policy framework is generally adequate and the authorities have instruments at their disposal to mitigate, at least partially, the impact of the weakening of the lari”, said the World Bank.