BAKU, Azerbaijan, April 28. Georgia's low levels of domestic savings foster reliance on external financing, in turn making the economy vulnerable to a tightening in external financing conditions, Trend reports with the reference to the Moody’s Investor Service.
This is partly offset by Georgia's strong relationships with official creditors, which have provided concessional support to the economy while the country is adversely affected by the coronavirus pandemic. Other key credit challenges include the lack of scale in key sectors of Georgia's economy, which constrains productivity.
Georgia's economy is highly flexible, reflecting its product and labor markets as well as a floating exchange rate which effectively buffers external economic and financial shocks. Moody's forecast for growth of 3.8 percent in 2022, is lower than our earlier forecast of 7.3 percent growth, reflecting the flow on effects of slower global growth, the impact of the geopolitical situation.
However, from a longer-term perspective, Moody's expects potential growth to be at 4-5 percent in the next few years, driven by increased investment in productivity-enhancing infrastructure in agriculture and manufacturing. Further, increases in exports to more diversified markets including Europe, partly reflecting additions to Georgia's Free Trade Agreements, will also boost economic activity.