BAKU, Azerbaijan, Sept.15
By Tamilla Mammadova – Trend:
Georgia is forecast to return to economic growth of 4.5 percent in 2021 from expected recoveries in tourism, private consumption, investment, and net exports, following a contraction this year from the coronavirus disease (COVID-19) pandemic, Trend reports via the Asian Development Bank (ADB) report.
The bank forecasts a 5 percent contraction in economic growth of Georgia in 2020 in view of the adverse effects of COVID-19 on the economy and investment climate, but a rebound in 2021.
Real gross domestic product (GDP) declined by an estimated 5.8 percent in the first half of this year against 4.8 percent growth in the same period of 2019, the bank said.
“Georgia has adopted several measures to mitigate the impact of COVID-19 on the economy including easing bank regulations and tax collection, broadening social packages, a cautious reopening of businesses and the promotion of internal tourism,” said ADB Country Director for Georgia Shane Rosenthal.
According to him, the recovery can be maintained by prolonging certain tax and credit concessions, stimulating private sector development, and strengthening health institutions in preparation for a possible second wave.
"ADB remains fully committed to helping Georgia overcome the pandemic and we’ll be there to help the country realize a new era of diversified and inclusive growth,” Rosenthal noted.
The report forecasts inflation in Georgia to reach 6 percent and 4.5 percent in 2020 and 2021, respectively, higher than the bank’s previous estimates in its Asian Development Outlook, released in April.
In the first half of 2020, inflation was 6.4 percent, up from 3.6 percent last year, reflecting price increases of 13.6 percent for food, 4.3 percent for other goods, and 2.2 percent for services. Core inflation reached 6.6 percent and the producer price index rose by 10.1 percent. The Georgian lari depreciated by 4.4 percent year on year in real terms as inbound tourism and foreign direct investment plunged, though the National Bank of Georgia, the central bank, intervened to smooth the decline.
Restrictions to contain COVID-19 cut private investment by 1.9 percent. Public consumption recorded a small decline of 0.9 percent, and public investment of 0.8 percent, but both are expected to strengthen in the remainder of 2020 and support private consumption and investment following the announcement of fiscal stimulus equal to 7.5 percent of GDP.
The report sharply raises projections for Georgia’s current account deficit in 2020 and 2021 to 11 percent and 8 percent, respectively, following a near-doubling of the deficit in the first quarter of this year as a 29.8 percent decline in receipts from tourism cut exports of services by 15.6 percent.
the bank said the possibility of a prolonged disruption of tourism and external demand and supply chains continues to weigh on the growth forecast, as does the prospect of a slowdown in government processes following parliamentary elections in October.
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