Quarter 4 2017, Macro Review | Georgian economy in 2017 – a year in review
28 February 2018

Among the pleasant surprises early this year, were the figures for Georgia’s economic growth in 2017. According to GeoStat estimates, Georgia’s real GDP grew by 4.8% year over year (YoY) in 2017. This result moderately surpassed the ADB, EBRD, IMF, and World Bank’s last growth projections of 4.2%, 3.9% 4.0%, and 3.5% growth, respectively. NBG's 4.5% growth projection also slightly underestimated Georgia’s economic growth in 2017. The real winner in this race was ISET-PI’s annual GDP growth forecast. In November 2017, we predicted 4.7% YoY growth, and since then our updated forecasts indicated 4.8% real GDP growth.

Yet, compared to neighboring countries (in particular Armenia and Turkey), Georgia’s performance was quite modest. According to the latest World Bank estimates, Turkey enjoyed 6.7% annual growth – driven by improved external demand from the EU, fiscal expansion, and the low GDP base of the previous year. However, due to political instability, massive depreciation of the lira, and double-digit inflation, the growth rate of the Turkish economy is expected to slow to 3.5% YoY in 2018. Signs of economic recovery were observed in Russia as well. The country’s 1.5% growth in 2017 was driven by a variety of factors: increased oil prices on the world market, an improved trade balance, huge infrastructure projects, a stabilized exchange rate and low inflation. These positive developments in Russia were transmitted to Armenia through remittances and trade channels. Economic growth in Armenia was the highest in the region (an impressive 7.7% in 2017, up from 0.2% in the previous year). The country benefitted in particular from higher metal prices, which drove up industrial output and exports. In Azerbaijan, real GDP growth was flat at 0.1% but was recovering from the 3.8% contraction of 2016. A tightened monetary and fiscal policy in the country failed to curb pressure on prices, and inflation reached 13.4% YoY. However, on a positive note for Azerbaijan, the non-oil sector grew by 2.7% YoY. Another important economy is China, as Chinese ambitions to expand its economic influence can have a powerful impact on the entire region. In 2017, China became the third largest trade partner of Georgia. Therefore, China’s 6.9% growth rate for the year comes as good news for our country.