ADB maintains Georgia’s growth outlook at 4.5% for next year

ADB maintains Georgia’s growth outlook at 4.5% for next year

The FINANCIAL -- A new Asian Development Bank (ADB) report, the Asian Development Outlook 2020 Update said that Georgia is forecast to return to the economic growth of 4.5 percent in 2021 thanks to expected recoveries in tourism, private consumption, investment, and net exports, following a contraction this year due to the coronavirus pandemic. In ADB’s flagship annual publication the bank forecasts a 5.0% contraction in economic growth in 2020 in view of the adverse effects of COVID-19 on the economy and investment climate, but a rebound in 2021. Real gross domestic product (GDP) declined by an estimated 5.8% in the first half of this year against 4.8% growth in the same period of 2019.

The report forecasts inflation in Georgia to reach 6.0% and 4.5% in 2020 and 2021, respectively, higher than the bank’s previous estimates in its Asian Development Outlook, released in April. In the first half of 2020, inflation was 6.4%, up from 3.6% last year, reflecting price increases of 13.6% for food, 4.3% for other goods, and 2.2% for services. Core inflation reached 6.6% and the producer price index rose by 10.1%.

The Georgian lari depreciated by 4.4% year on year in real terms as inbound tourism and foreign direct investment plunged, though the National Bank of Georgia, the central bank, intervened to smooth the decline. Restrictions to contain COVID-19 cut private investment by 1.9%. Public consumption recorded a small decline of 0.9%, and public investment of 0.8%, but both are expected to strengthen in the remainder of 2020 and support private consumption and investment following the announcement of fiscal stimulus equal to 7.5% of GDP. The report sharply raises projections for Georgia’s current account deficit in 2020 and 2021 to 11% and 8%, respectively, following a near-doubling of the deficit in the first quarter of this year as a 29.8% decline in receipts from tourism cut exports of services by 15.6%, Georgian public Broadcasting reported.

“Georgia has adopted several measures to mitigate the impact of COVID-19 on the economy including easing bank regulations and tax collection, broadening social packages, a cautious reopening of businesses, and the promotion of internal tourism. The recovery can be maintained by prolonging certain tax and credit concessions, stimulating private sector development, and strengthening health institutions in preparation for a possible second wave", said ADB Country Director for Georgia Shane Rosenthal, according to agenda.ge

The possibility of a prolonged disruption of tourism and external demand and supply chains continues to weigh on the growth forecast, as does the prospect of a slowdown in government processes following parliamentary elections in October. ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region, – ADB stated,

It is interesting to note that in July of 2020, The Asian Development Bank (ADB) announced an investment of up to $20 million in green bonds to be issued by Georgia Global Utilities JSC (GGU), with proceeds to upgrade water supply and sanitation in Tbilisi and nearby municipalities and to refinance the debt of renewable energy and water operations. ADB will also administer a further investment of up to $20 million in the bonds by Leading Asia's Private Infrastructure Fund (LEAP). Read more.

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Author: The FINANCIAL

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