BAKU, Azerbaijan, November 8
By Tamilla Mammadova – Trend:
Georgia’s economy has grown rapidly and consistently this year, Trend reports referring to the Georgian investment company Galt & Taggart.
Growth was 4.7 percent year-on-year in 1H2019 and remained broad-based despite weakness in the construction sector that mostly reflected the completion of the BP gas pipeline construction.
According to initial estimates, the growth was strong at 5.7 percent in 3Q2019 (6.1 percent in July, 5.8 percent in August, and 5.2 percent in September), as construction recovered and service sectors continued growing.
"We expect softer growth of 3.5 percent in 4Q2019 due to last year’s high base and keep our 2019 growth forecast at 4.5 percent," said the company.
External sector boosted goods exports and remittances. This, combined with reduced imports, made net exports a positive contributor to growth in 1H2019 together with consumption. Notably, after a tourism boom in 1H2019, arrivals have slowed.
However, they still posted growth of 1.4 percent through July-September despite reduced Russian tourists due to Russia’s ban on direct flights to Georgia from July 8. In addition, the banking sector’s credit portfolio expanded by a solid 14.6 percent excluding Foreign Exchange (FX) effect in 9M2019, and corporate loan book is expanding at a faster rate.
This will be beneficial for growth potential, Galt & Taggart stated. Fiscal policy was expansionary in 9M2019, with a deficit at 37 percent of annual plan, compared to the surplus in 9M2018. This reflects acceleration in public capital spending of 57.9 percent in 9M2019.
"We expect growth at 4.7 percent in 2020. If the National Bank of Georgia (NBG) keeps the policy rate unchanged throughout 2020, and parliamentary elections weigh on business confidence, growth could soften to 4 percent in 2020," the company said.
The economy is likely to benefit from regional economies, where export growth has been stronger than expected in recent months. Tourism and remittances from the EU and other countries are also expected to grow. If Russia’s ban on direct flights is lifted, this could produce a positive shock to growth. Galt & Taggart expects bank lending to grow by 9-12 percent excluding FX effects in 2020.
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