January 2018 Macro Review | Georgian economy – a year in review
22 February 2019

The preliminary statistics released by Geostat reveal that Georgia’s real GDP growth was 4.8% year over year (YoY) in 2018. These results are behind the World Bank’s, IMF’s, ADB’s, and NBG’s latest growth projections of 5%-5.5%.

ISET-PI’s leading GDP indicator forecast, made at the beginning of the year, was more precise. At the time, we predicted 4.6% annual growth in the worst-case, “no growth” scenario, and 5.6% in the best-case or “average long-term growth” scenario. While our “middle-of-the-road” scenario predicted the exact 4.8% real GDP growth.

In 2018, Georgia’s growth was characterized by high volatility. The economy grew by 5.4% in the first half of the year, though the growth rate slowed to 4.3% YoY by the second half, including 2% and 2.2% YoY growth in August and November. This was driven by both external and domestic factors. A marked weakness of activity in Turkey and the 30% depreciation of the lira, reflected capital outflows in response to accelerating inflation, as a perceived delay in monetary tightening, which negatively affected Georgia’s growth through trade, FDI inflow, money transfers, and tourism channels. Among domestic factors in 2018, weakened fiscal stimulus, delays in infrastructural projects, and tightened regulations granting construction permits and construction processes, each deteriorated growth.