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ADB makes forecast on economic indicators of Georgia

Business Materials 3 April 2020 11:27 (UTC +04:00)
ADB makes forecast on economic indicators of Georgia

BAKU, Azerbaijan, April 3

By Tamilla Mammadova - Trend:

Georgia will experience a substantial slowdown in 2020 due to the COVID-19 pandemic and lower oil prices, Trend reports via Asian Development Bank (ADB).

As reported, a recovery is expected in 2021 as a result of higher domestic demand, increased foreign direct investment, and a rebound in workers’ remittances.

In Asian Development Outlook (ADO) 2020, the bank’s annual flagship economic publication, ADB projects Georgia’s gross domestic product (GDP) growth to decline to 0 percent in 2020 as the impact of COVID-19 and lower oil prices constrain consumption and limit expansion in tourism and trade. However, Georgia’s economy is expected to bounce back with a 4.5 percent growth in 2021.

“As a leading reformer, Georgia has already taken measures to soften the economic shock of the pandemic, such as imposing a moratorium on collecting property and income taxes in the hospitality sector, easing bank lending regulations, and increasing spending on infrastructure, among others,” said ADB Country Director for Georgia Shane Rosenthal.

As reported, gains in retail trade and higher government spending on education are forecast to boost services by 1.1 percent in 2020. The figure is projected to rise to 6.3 percent in 2021 as tourism recovers. Growth in industry, meanwhile, is projected to contract to 3.1 percent in 2020 due to a slowdown in construction and manufacturing, before recovering to 2.1 percent in 2021 with higher mining output.

Inflation is projected to slow to 4.5 percent in 2020 and 3 percent in 2021 - in line with the central bank’s target - as a result of the introduction of administered prices on food.

Georgia’s external prospects will depend heavily on developments in its trading partners. The current account deficit is projected to narrow further to 4.4 percent of GDP in 2020 and 4.2 percent in 2021, with a continued decline in imports as much lower oil prices help trim the trade deficit.

Exports are projected to grow by 3.6 percent in 2020 and by 11.9 percent in 2021, while modest domestic expansion and higher Foreign Direct Investment (FDI) are expected to raise imports by 1.1 percent in 2020 and by 7 percent in 2021.

Risks to economic growth include greater than expected sluggishness in trading partners’ economies, weaker than expected domestic demand, slower growth in tourism revenues, and tighter liquidity in global financial markets, in part reflecting the impact of COVID-19.

The ADB report highlights the need for Georgia to promote technological innovation for business development. While the country has made tangible progress in creating innovative digital services, the government can make electronic commerce more trustworthy and viable by improving legal and regulatory frameworks while creating more efficient mechanisms for setting taxes and tariffs.

"The government of Georgia should also continue reforms in education and improve familiarity with digital technologies, particularly in rural areas, to make growth more inclusive," the ADB said.

ADB has supported Georgia since 2007 and is one of the country’s largest multilateral development partners. Sovereign and non sovereign loans to Georgia total $3.5 billion. ADB’s key development priorities in Georgia include fostering inclusive and sustainable economic growth, reducing poverty, enhancing regional connectivity, and improving public service delivery.

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