BAKU, Azerbaijan, March 16
Tamilla Mammadova – Trend:
Following a 5.6 percent drop in 3Q2020, real GDP decreased by 6.5 percent year-on-year in the last quarter of the year due to the reintroduction of a partial coronavirus-related lockdown in late November 2020 in Georgia, Trend reports via the TBC Capital.
For 2020 as a whole, the drop in GDP was assessed at 6.1 percent.
According to the report, since the beginning of the COVID-19 pandemic, tourism inflows have remained close to zero, although non-tourism inflows have displayed resilience. Namely, for the full year of 2020, exports decreased by 12 percent in US dollar terms, while actually increasing by 3.5 percent (with re-exports excluded).
"The main reason behind this is the fact that Georgia produces very few, if any, capital goods – demand for which has been subdued during the pandemic. Instead, Georgian exports have higher domestic value added in the production of essential goods, which have been more resilient during the crisis. In addition, remittance inflows increased by 8.8 percent in 2020, including a strong, 15.7 percent year-on-year growth in the fourth quarter. Some of this increase was due to reduced cash inflows and increased digital transfers as a result of the closed borders," the report said.
"However, even after adjustment for this component, as per our estimates, remittance inflows increased by 5 percent in 2020, which is explained by strong household disposable income dynamics in most remitting countries on the back of unprecedented fiscal responses to the pandemic," the company said.
As for foreign direct investment (FDI), the inflows showed relative resilience, especially when adjusted for 4Q2020 one-off transfer of ownership from non-resident to the resident companies amounting to around $294 million.
"Alongside lower total inflows, re-exports and oil prices, coupled with a weaker lari and diminished domestic demand, imports of goods dropped by 15.9 percent in 2020, leading to around a one-billion-dollar improvement in the trade in goods balance," said the report.
“Although January 2021 GDP growth came in at -11.5 percent, this decline was in line with expectations. As the low base effect comes into play and the non-tourism sector continues to perform relatively better, for the full year of 2021 we expect around 4 percent growth. This will be followed by around a 7.5 percent rebound in 2022, the main driver of which will be the almost-full recovery of the tourism sector”, the report reads.
As in 2020, household consumption supported by remittances, public current spending and grace periods on credit, is going to be strong and will lead the growth in 2021 before net exports turn positive and investments also recover substantially.
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