The COVID-19 outbreak has negatively affected the Georgian economy through reduction in FDI, exports of goods and services, and remittances. In addition, uncertainties caused by the pandemic and containment measures hit consumption and domestic investment. As a result of this reduction in aggregate demand, combined with increased production costs due to pandemic-related constraints, GDP is expected to contract by 5% in 2020 according to NBG’s latest monetary report. The growth estimate has been revised downward since May, when NBG’s forecast stood at -4%. The revision was driven by weaker-than-previously-anticipated external demand, which is mainly caused by delays in the resumption of international flights. According to an alternative scenario, in which pandemic-related restrictions remain in place the whole year, a 6.5% decrease in GDP is expected in 2020.

In March 2020 as a result of the COVID-19 pandemic, the global economy started to sink into what is expected to be the deepest worldwide recession since World War II. Despite unprecedented policy support, the majority of countries have failed to soften the fallout from the crisis. According to World Bank estimates, global GDP will contract by 5.2% year over year (y/y) in 2020. The United States and Euro Area are projected to shrink by 6.1% and 9.1% respectively, while the Chinese economy is expected to grow at just 1% in 2020. In addition, all of Georgia’s neighbours are expected to face an economic contraction this year: from -2.6% (Armenia) to -6% (Russia).

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