Baku, Azerbaijan, September 11
By Tamilla Mammadova – Trend:
Despite the reduction of Foreign Direct Investment (FDI), the level of the gross capital formation remains strong in Georgia, supported by higher domestic savings and strong business lending, Trend reports via the TBC Research.
Also, shift of public expenditure towards the capital spending keeps the investments strong.
From the trend growth perspective, even with FDI inflows at 5-6 percent of GDP, Georgia’s potential growth rate is around 5 percent. The latest, April 2019 IMF’s trend growth assessment equaled 5.2 percent.
The decline of FDIs in the second quarter of 2019 was fully offset by the improved balance of trade in goods. Correspondingly, estimated drop of inflows in July may also be revised upwards. In addition, recently released weakly data indicates a sizeable improvement in tourism growth.
These factors, taken together with the continued growth of remittances and favorable financing conditions internationally, enables to argue that the external balance is reasonably strong.