BAKU, Azerbaijan, May 2
By Tamilla Mammadova - Trend:
The COVID-19 pandemic has hit the Georgian economy hard, said Deputy Managing Director at International Monetary Fund (IMF) Tao Zhang, Trend reports referring to IMF.
"A drop in external demand and tourism has widened the current account deficit, led to a depreciation of the exchange rate, and a substantial decline in economic activity. The authorities have acted rapidly by introducing sweeping containment measures and targeted support to households and to most affected sectors," Tao Zhang said.
According to him, the fiscal deficit has increased, and external financing has been mobilized to allow for additional spending.
Tao Zhang noted that, while increased public spending is necessary, vigilance is needed to safeguard debt sustainability, particularly against fiscal risks arising from state-owned enterprises.
“The National Bank of Georgia has appropriately maintained a moderately tight monetary policy stance, while allowing exchange rate to remain flexible. Monetary policy decisions should be based on close monitoring of inflationary expectations," the deputy managing director said.
He added that advancing structural reforms would help sustain medium-term growth potential and achieve a faster recovery after the pandemic.
Adopting the indexation rule for public pension would contribute to sustain theincome of pensioners. Completing the banking resolution framework and implementing the insolvency framework would help support the recovery, Tao Zhang noted.
“The augmentation of access under the Extended Fund Facility arrangement should support the authorities’ policies to address the COVID-19 shock and help meet the urgent balance-of-payments need,” he said.
---
Follow the author on twitter: @Mila61979356