International Monetary Fund increased Georgia’s economic growth forecast to 5.5%. The reason for that, as they say, is more intense economic activity than expected.
“The economic activity increased in the first half of 2018. Annual growth made 5.7%, which was facilitated by strong external demand and increase of money transfers and crediting. By the preliminary data, as of the end of July, the budget execution was also better than expected. In July, the inflation rate was 2.8% and during the year it has mainly been lower than the targeted rate (3%) of the National Bank of Georgia. Taking into consideration that the inflation forecast has been retained on a low level, the National Bank started normalization of the monetary policy and reduced the monetary policy rate by 25 base points. At the same time, the rate of deposit and loan dollarization keeps on reducing.”
Taking into account the high economic activity, we increased the 2018 growth forecast from 4.8% to 5.5%. The expected high economic activity and weakening of trade conditions will probably increase the current account deficit. The risks of possible negative influence on the economic outlook, which is conditioned by the situation in the region and trade competition create the need for reserve accumulation and retention of flexible exchange rates. The flexible exchange rate is useful for Georgia and together with reasonable macro policy, it will strengthen the country’s resistance to external shocks.
“IMF Mission discussed with the government of Georgia the progress of reforms facilitating the high and inclusive growth and assessed various initiatives. The government of Georgia established an independent pension agency and approved provisions for enforcement of the law on private and public cooperation. The government refined the law on non-solvency and enforced provisions supporting responsible crediting. In the present situation it is appropriate to continue structural reforms for the purpose of increasing resistance of the economy, private sector-led growth, diversification of the economy and improvement of the quality of life,” – states the press release of the Fund.
