BAKU, Azerbaijan, Dec.23
By Tamilla Mammadova – Trend:
The Georgian economy was negatively affected by the COVID-19 pandemic this year because of the lockdown and halt in international tourism, Trend reports via Georgian Galt&Taggart analytics company.
"Based on preliminary estimates, the economy contracted by 5.8 percent in 9M2020, with GDP contraction easing to 5.6 percent in 3Q2020 from 13.2 percent decline in 2Q2020 (notably, Geostat revised both 2Q2020 and 3Q2020 downwards. GDP growth figures from 12.3 percent and 3.8 percent rapid estimates, respectively). However, rising COVID cases (for details, see our report on the healthcare sector) in recent months deteriorated sentiments, and this, along with post-election political uncertainty, weighed on lari," Galt and Taggart reported.
As reported, with the absence of international tourism, hospitality and other tourism-related sectors were hit hard.
"Meanwhile, remittances continued strong growth supporting domestic demand along with sizable fiscal stimulus and implementation of public Capex," Galt and Taggart said.
According to the analysis, the surge in COVID-19 cases prompted the government to reintroduce lockdown restrictions from November 28, 2020, until January 31, 2021.
Galt and Taggart assess these restrictions as softer than the first lockdown when most of the economic activities were banned.
"We expect the economy to rebound to 5 -5.5 percent growth in 2021, assuming tourism to recover to 50 percent of its 2019 level, which will support tourism-related sectors to turn into growth. In this regard, positive news on vaccine and the fact that over 70 percent of total arrivals travel by car to Georgia make us optimistic on tourism recovery dynamics," the investment bank reported.
Without a recovery in tourism, Galt and Taggart expect growth at around 3.7 percent in 2021. In this scenario, it projects economic activity to be positive in agriculture, mining, manufacturing, and construction, amongst others.
"We note that, with limited room for the rate cut in 2021, the fiscal policy will continue to have a central role in stabilizing the economy, with fiscal deficit set at 7.6 percent of GDP," the report said.
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