Georgia’s estimated real gross domestic product (GDP) growth rate in May amounted to 25.8% y/y, while for January to May it was 11.5%, according to a rapid estimate by national statistics office Geostat.
May saw growth, year on year, in almost all sectors. Significant contributions were observed in manufacturing, financial and insurance activities, trade, real estate activities, hotels and restaurants, construction, transportation and storage. The Georgian economy shrunk by 6.2% in 2020.
TBC Capital has updated its growth forecast for 2021, projecting a 10.5% economic advance. According to the bank, despite the low rate of coronavirus vaccination at the moment in the country, a strong economic recovery is expected. The economy will expand by another 6.5% in 2022 and 5.5% in 2023, according to TBC’s revised model.
The International Monetary Fund (IMF) has doubled its forecast for Georgia’s economic growth this year from the 3.5% envisaged in April to a buoyant and slightly optimistic 7.7%. The forecast was issued under the Article IV Consultations with the South Caucasus country.
The Fund expects the economic rebound to help the government bring public debt down from over 60% of GDP to 55.3% of GDP at the end of the year, compared to a slight deterioration (60.8% of GDP) envisaged under the previous forecast in April.
Robust growth in remittances and exports, and early signs of a faster than expected rebound in tourism have supported the recovery and should contribute to a narrowing of the current account deficit (to 9.9% of GDP) compared to its elevated 2020 level, according to the IMF.
All such optimistic scenarios depend on a tourism recovery, which in turn is sensitive to the health situation globally. Significant downside risks remain and contribute to an outlook that is more uncertain than usual, the Fund acknowledged, urging Georgia to increase its coronavirus vaccination rate.
The Georgian government has announced new coronavirus restrictions that will apply between August 14 and September 4 to curb the spread of coronavirus. Georgia reported 5,128 new cases of coronavirus, 3,310 recoveries and 49 deaths in the past 24 hours.
Georgia’s consumer price inflation came in at 9.9% year on year in June, a major 2.2pp rise from 7.7% y/y in the previous month, according to Geostat. Notably, the national currency has strengthened significantly in June versus the US dollar, to 3.16 GEL to USD from 3.38 in May and 3.44 in April, easing the pressures exerted by expected inflation.
Galt & Taggart has forecast that the country's average inflation rate will be 8.3% this year. This is 1pp above the forecast lately put out by the International Monetary Fund (IMF) and suggests that the central bank may have to further hike its key refinancing rate. It already stands at 9.5% following two hikes this year. The main drivers for a sharp rise in inflation as seen by Galt & Taggart are base effects following subsidies paid by the government in the winter of 2020-2021 and the increase in the price of bakery products.
The aggregated net profit of Georgia's banks more than doubled in June compared to the same month last year, to Georgian lari (GEL) 295mn ($92mn) - it amounted to the biggest profit ever recorded by the banks in the country’s history. The banking system remains adequately capitalised and liquid, the International Monetary Fund (IMF) said in its Concluding Remarks after Article IV Consultations with the country. 2Q21 earnings for the two largest banks- TBC and Bank of Georgia - saw robust growth driven by a solid operating performance.
E-commerce in Georgia increased more than threefold year-on-year in 2020 to nearly $45mn, a Galt & Taggart report states. The Covid-19 pandemic has boosted Georgia’s e-commerce market, as lockdowns encouraged many to purchase online for the first time or increase the frequency of online purchases. The lockdowns also forced Georgian companies to expand their online offerings.
On the trade front, Georgia's exports rose by nearly one-third year-on-year in June, while PPI for industrial goods rose 15%, Galt & Taggart reported. Overall, in 1H21, the trade deficit was up by 14.5% y/y to US$ 2.4bn, as exports increased by 25.2% y/y to US$ 1.9bn and imports increased by 18.9% y/y to US$ 4.3bn.
Georgia's foreign trade in the first six months of 2021 increased by over one-fifth year-on-year, Geostat reported on July 13. Furthermore, it was 0.5% above the pre-coronavirus crisis trade turnover seen in H1 2019.
The leaders of Georgia, Ukraine and Moldova signed a declaration on July 20 in Georgia's Batumi committing to EU integration. This comes amid a growing rift between the EU and Georgia over recent political developments, with tensions high over the ongoing government response to extremists who violently forced the cancellation of the Tbilisi Pride event.
On the political front, US State Department Spokesperson Ned Price and seven senators of the Foreign Relations Committee on July 28 levelled criticisms against the ruling Georgian Dream party in Georgia for quitting the EU-brokered April 19 agreement. Georgian Dream announced on July 28 that it would be leaving the deal.
Ned Price argued that the withdrawal “undermines an agreed upon way forward for the country through needed reforms and risks a return to political crises.” He called on all political parties to work together to “advance’ Georgia’s Euro-Atlantic integration.
Tbilisi City Court on August 25 found three men guilty on charges related to the July 5 assault of Formula TV anchorman Vakho Sanaia. Journalists became the primary target of the protesters as pro-LGBT activists stayed indoors. The violence has also elicited international condemnation from both foreign governments and rights groups. European Council President Charles Michel underscored that fundamental rights and freedoms play a central role in EU-Georgia relations.
President Recep Tayyip Erdogan did it again. On September 23, Turkey shocked with a 100bp rate cut. More cuts are awaited despite booming (even official) inflation and global inflationary period.
Ukraine’s real GDP increased 5.7% y/y in 2Q21, the State Statistics Service reported on September 20, improving on its preliminary estimate of 5.4% y/y. However, economic growth is slowing as the ... more
Rosstat revised its 2Q21 GDP estimates up to 10.5% y/y in the quarter, up from the preliminary estimate of 10.3% y/y. The growth was the highest since the economic bounce back in 2000, following the ... more