ISET

According to the preliminary statistics released by GeoStat, Georgia’s real GDP growth was 4.5% year over year (y/y) in Q2 2019, which fell slightly below the 4.8% growth predicted by ISET-PI’s GDP forecast from July. As economic growth constituted 4.9% y/y in Q1, the Georgian government’s 4.5% target of real GDP growth for 2019 does not seem overambitious.

The economic growth in Q2 2019 was mostly driven by stronger external demand, which stimulated net exports of goods and services. Raised remittances also positively affected the economy, however, an extremely low level of foreign direct investment (FDI) drove down GDP growth in the reported quarter. Accelerated fiscal spending, moderate growth of credit activity, and consumption were the internal drivers of growth, while deteriorated business sentiments and a decreased level of investment hindered economic growth in the second quarter.

Despite the robust economic performance in the first half of 2019, the external and domestic risks that have emerged could harm GDP growth in the future.

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