ISET

According to Geostat, the 2019 real GDP growth in Georgia was 5.1% year-over-year (YoY). This figure moderately surpassed NBG’s, ADB’s, EBRD’s, IMF’s and the World Bank’s latest growth projections for 2019, which range from 4.5%-4.7%. However, the real winner in this race was ISET-PI’s annual GDP growth forecast; in May 2019, we predicted a 4.9% annual growth. Although 2019 may now seem like the distant past in light of the coronavirus epidemic, it is worth noting that Georgia headed into 2020 with strong momentum. Therefore, the fact that the 2019 growth outcomes were strong will likely soften the impact of COVID-19 on the economy in 2020.

According to the preliminary statistics released by GeoStat, Georgia’s real GDP growth constituted 5.7% year over year (y/y) in Q3 2019. As a result, estimated real GDP growth for the first nine months of 2019 amounted to 5.0%, which is above the National Bank of Georgia’s (NBG) growth forecast for 2019 (the forecast remained unchanged at 4.5%). Meanwhile, based on September’s data, ISET-PI expects annual growth in 2019 to be 4.9%.

The economic growth in Q3 2019 was driven by increased external demand, which stimulated net exports of goods and services, and strong fiscal stimulus. A rise in remittances also positively affected the economy, while lower revenues from international travellers caused by the Russian ban on air travel to Georgia hindered economic growth in the reported period. Data on foreign direct investment (FDI) for Q3 is not available yet. However, we expect the negative trend in FDI to continue in the second half of the year. Furthermore, lower inflows of foreign currency from tourism and FDI caused the recent depreciation of the lari against the currencies of major trading partners, resulting in increased prices of imported products, and a higher inflation rate.

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