The Asian Development Bank (ADB) has raised Georgia’s 2018 growth forecast to 4.9 per cent from the April estimate of 4.5 per cent, reflecting strong growth in tourism and robust investment after an increase in business and investor confidence.
The growth forecast for 2019 is five per cent, says the update of ADB’s flagship annual economic publication, Asian Development Outlook 2018.
Georgia has made impressive economic progress over the last decade. We expect economic performance to remain strong as domestic and external demand continues to strengthen”, says ADB Country Director for Georgia Yesim Elhan-Kayalar.
ADB’s latest projections follow the five per cent gross domestic product (GDP) growth in 2017 and an estimated 5.7 per cent in the first half of 2018.
“Small firms, in particular, benefitted from a new concessional tax regime featuring lower rates, easier compliance, and automatic refunds for excess payment of value-added tax, as well as a tax liability write-off for defunct firms. On the demand side, higher capital investment fueled growth, as did private consumption that benefited from an 18.3 per cent rise in remittances in the first half of 2018 over a year earlier.
“Inflation slowed from six per cent in July 2017 to 2.8 per cent year on year in July 2018, which was also the average annual rate in the year to date. Core inflation fell below two per cent. The slowdown reflected inflation easing for food, tobacco, and alcoholic beverages, along with price declines for clothing and footwear and communication services. Further, credit growth moderated to 4.2 per cent in the first half of 2018, prompting the National Bank of Georgia—the central bank—to cut its policy rate to seven per cent in July. The report trims the inflation forecast for 2018 to three per cent to match the forecast for 2019, which is unchanged.
“The current account deficit widened to equal 11.6 per cent of GDP in the first quarter of 2018 as growth in exports trailed that of imports in absolute terms. Exports of goods and services expanded by 23.4 per cent in the quarter, thanks to strengthening external demand and government support for the export sector. In the first half, exports of goods rose by 28.5 per cent. Meanwhile, rising domestic demand, strong growth, and improved business and consumer confidence boosted imports by 22.9 per cent in the first half, notably for consumer and investment goods. With higher-than-expected oil prices and robust public investment, earlier projections for the current account deficit are maintained”, reads the ADB report.