Georgia, the small South Caucasus country of 3.9mn, expanded by 4% y/y in June. The expansion was driven by a rise in activity in transport, hotels and restaurants, financial intermediation and trade sectors. The average estimated real GDP growth in the second quarter was 6%, and the average rate in the first half of 2018 was 5.7%.
The economy achieved 5% growth in 2017. The Georgian economy has bounced back from several years of slow growth across 2015-2016, when a depressed economic environment in the region and low oil prices indirectly impacted its performance. Multilateral development banks all expect the country's GDP growth to exceed 4% in the near-term, up from 2.7-2.8% in 2015-2016.
The growth spurt was prompted by a flurry of domestic and foreign investments in construction, retail, infrastructure and real estate amidst a recovery in consumption levels and an increase in inbound tourism. However, structural imbalances continue to plague Georgia's macroeconomy, most notably its large trade deficit, which is financed partly with external borrowing, and its unpredictable currency, the exchange rate of which has varied widely.
Georgia's foreign trade deficit inched upwards to $5.25bn in 2017, up from $5.18bn in 2016, and by 17.5% y/y to $1.34bn in the first quarter of 2018. Imports continue to dwarf exports, at $2.8218bn in April compared to exports of just $961.4mn.
Reducing the foreign trade and overall current account deficit has been an ongoing concern in Tbilisi. An oil and gas-importing country, Georgia has struggled to expand its manufacturing base enough to make up for its sizeable energy imports and for its imports of higher added-value goods.
Meanwhile, consumer prices grew 2.8% y/y in July; well within the government's target rate of 3%. As a result of the rapid strengthening of the nominal effective exchange rate, inflationary pressure is reduced.
On the political front, Georgian President Giorgi Margvelashvili has set October 28 as the date for the country’s next presidential election. This will be the last time that Georgians elect their president directly, following controversial changes to the constitution that will see the president chosen by the 300 members of the College of Electors. Margvelashvili hasn’t yet announced whether he will run for re-election this autumn, and told journalists on August 1 that he would announce his decision on whether to take part in the elections “after evaluating the context”.
To Purchase This Report - Click
The National Bank of Ukraine (NBU) reviewed downwards the assessment of growth of real GDP of the country in 2018 to 3.3% from 3.4%, but the change is unimportant as Ukraine continues to grow well ... more
The Belarusian economy is basically doing pretty well, although growth has fallen off in the last year. The country finished 2018 with 3% growth, however, in January growth fell to a low 0.7% on an ... more
Russia’s economy put in a modest 0.7% growth in January y/y, as expectations for this year remain subdued, despite a controversial upgrade to 2.3% growth by Rosstat for the whole of 2018.