BAKU, Azerbaijan, April 15
By Tamilla Mammadova - Trend:
With the COVID-19 pandemic, Georgia’s economic outlook has significantly deteriorated, Trend reports with reference to International Monetary Fund (IMF).
As reported, real GDP is expected to decline by 4 percent in 2020, although projections are subject to more than the usual uncertainty.
Deteriorating trade, halted tourism, and weaker remittances are expected to widen the current account deficit to 11⅓ percent of GDP in 2020. Rising global risk aversion is likely to reduce private financial inflows and delay investment. Urgent balance-of-payments needs raising from the COVID-19 shock are estimated at about $1.6 billion in 2020-21, to be financed by IMF and other donor organizations.
“The authorities have taken decisive steps to contain the COVID-19 pandemic and limit its economic impact. Prudent macroeconomic policies, the buildup of fiscal and foreign exchange reserves in recent years, a well-capitalized financial system, and significant financial donor support make the Georgian economy prepared to address the shock," the IMF said.
According to IMF, the fiscal deficit is expected to temporarily widen to 8.5 percent of GDP in 2020, as revenues decline and spending rises to contain the virus outbreak and offset the social and economic impact of the pandemic.
The authorities have mobilized financing from the IMF and other international partners to finance the deficit and build buffers that would allow for additional policy space if downside risks materialize. Once the shock is over, the authorities are committed to fiscal consolidation and to build buffers for fiscal risks, IMF said.
“Within its mandate of price and financial stability, the National Bank of Georgia (NBG) has intervened in the foreign-exchange market to smooth exchange rate volatility, and taken decisive steps to safeguard financial stability. Capital and liquidity buffers have been promptly released to support the economy, while banks have been asked to recognize losses promptly. The NBG stands ready to adjust policies as needed to support price stability and preserve financial stability," IMF noted.
As reported, advancing structural reforms will help sustain medium-term growth potential and help achieve a faster recovery after the COVID-19 pandemic.
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