bne IntelliNews – National Report on Georgia Dec21
Georgia’s economy remained stable at 6.9% in October, the same level as in September, according to preliminary data released by the statistics office Geostat. For the first 10 months of the year, Geostat estimates an average growth rate of 10.5%.
The government drafted the 2021 budget on 10% growth assumptions, while forecasting 6% GDP growth for 2022. TBC Capital revised upward its forecast for this year’s GDP growth in early November. in Georgia from 10.5% forecast in its summer forecast at 11-11.5%. The figure now looks optimistic, especially given new COVID-19 restrictions that may impact the winter tourist season in the country. For 2022, TBC expects growth of 6%.
Global rating agency Moody’s Investors Service expects Georgia’s economy to grow 7.3% in 2021, after contracting 6.2% in 2020, supported by support from consumer fiscal policy in 2021 and signs of a constant rebound in regional tourism. Moody’s predicts potential growth of 4-5% over the next few years, driven by increased investment in productivity-enhancing infrastructure in agriculture and manufacturing.
The International Monetary Fund (IMF) predicts Georgia’s economy to grow 7.7 percent in 2021 and 5.8 percent in 2022, according to WEO’s latest report, World Economic Outlook: Recovery During a pandemic.
With these indicators, Georgia will have one of the highest economic growth rates in the Middle East and Central Asia region.
The Fund expects the economic rebound to help the government reduce public debt from over 60% of GDP to 55.3% of GDP by the end of the year, from a slight deterioration (60.8% of GDP) envisaged in the previous forecast in April. .
Robust growth in remittances and exports, and the first signs of a faster than expected rebound in tourism have supported the recovery and are expected to help reduce the current account deficit (to 9.9% of GDP) by compared to its high level in 2020, according to the IMF.
The recovery in tourism strengthened in October 2021, with tourist arrivals (nights) recovering to 313% more than in October 2020 but 69% less than in October 2019. In particular, tourism revenues in October jumped 73% year-on-year.
Significant downside risks remain and contribute to a more uncertain outlook than usual, the Fund acknowledged, urging Georgia to increase its coronavirus vaccination rate.
Georgian health officials are alarmed and concerned that the recent low vaccination rate would lead to a high number of deaths at the start of the new wave of the virus. According to Worldometer data, Georgia ranks 13th in the world in COVID-19 deaths per million over the past week with 62 / min, behind only Armenia, Romania, Bulgaria and a handful of countries of the Caribbean.
From December 1, Georgian citizens and visitors will need a COVID pass to enter many establishments. The pass will only be issued to those who are fully vaccinated or have recorded a negative PCR test within the last 72 hours.
Georgia’s annual inflation reached 12.8% yoy in October from 12.3% yoy in September. The driving forces behind high inflation were mainly the result of one-off factors, such as significant increases in food and oil prices in international markets. The annual PPI of industrial goods was 16.8% in August 2021, down from 16.4% the month before, according to Geostat.
On October 27, the Monetary Policy Committee of the National Bank of Georgia (NBG) kept its key refinancing rate unchanged at 10% for the second time in a row, after raising it from 0.5% to its highest level. in 13 years in August. The NBG stressed that it is maintaining its tight monetary policy stance, as rising inflation remains a challenge for Georgia. Noting that consumer prices rose 12.3% in September, the NBG said it expected inflation to remain high until February 2022.
The aggregate net profit of the Georgian banking system in January-October increased by 38% compared to the same period in 2019, to reach GEL 1.76 billion ($ 567 million), according to the central bank. During the same period last year, banks reported net losses of GEL 85 million, caused by mandatory provisions made for the expected deterioration in the quality of their loans. Since then, part of the provisions have been released, which has contributed to the strong profits in 2021.
The banking system remains sufficiently capitalized and liquid, according to the IMF. 3Q21 earnings for the two largest banks – TBC and Bank of Georgia – saw robust growth driven by strong operating performance.
On the trade front, the central bank took note of some positive developments, including a 25% annual increase in exports in January-October, an increase of 11% over one year. Overall, in 10M21, the trade deficit increased by 20% yoy compared to 2020, with exports being strong and having made the largest contribution.
Foreign direct investment (FDI) in Georgia amounted to $ 234.2 million in the second quarter of 2021, marking a 2.6% year-on-year decline. .
On the political front, during his first appearance in court, Mikheil Saakashvili declared in a court in Tbilisi that he had been “tortured” during his pre-trial detention before the judge adjourned the proceedings until 23 December against the backdrop of clashes outside the courthouse between the police and supporters of the former president. Saakashvili ended his 50-day hunger strike earlier this month after authorities agreed to transfer him to a military hospital. The pro-Western politician, who declared a hunger strike on October 1, was arrested after returning to Georgia, after living abroad for years.
Meanwhile, Georgian Prime Minister Irakli Gharibashvili announced that stricter regulations would be applied to online casinos. Companies operating online casinos will pay higher taxes, advertising will be banned and the minimum age for customers will be raised to 25.
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