World Bank report surveys Georgian economy in 2019, coming years

Forecasts show that the real GDP growth of Georgia in 2019 will decline to 4.4 per cent while it hit 4.7 per cent in 2018. In 2020, growth will further dip to 4.3 per cent, but will recover in 2021, reaching 4.5 per cent. Photo: Nino Alavidze/Agenda.ge.

Agenda.ge, 11 Oct 2019 - 17:53, Tbilisi,Georgia

The World Bank has published a report titled Migration and Brain Drain 2019, in which it touches on economic conditions across the world prompting migration and brain drain. 

The report also reviews the Georgian economy; some of its major findings are below. 

Economic growth 

Forecasts show that the real GDP growth of Georgia in 2019 will decline to 4.4 per cent while it hit 4.7 per cent in 2018. In 2020, growth will further dip to 4.3 per cent, but will recover in 2021, reaching 4.5 per cent.

In Azerbaijan, growth will hit 2.8 per cent, while growth in Armenia is forecast to reach 5.5 per cent in 2019.  

Georgia’s decline in growth rate, the World Bank report writes, will largely be a result of the Russian flight ban. 

In the first half of 2019, net exports improved  as a result of decreased imports and increased re-exports of used cars and copper ore, notes the World Bank.

Georgian external trade amounts to $8.13 billion in January-August 2019

All sectors except for mining and electricity production, contributed positively to growth, writes the report.

Recent developments (a ban on flights from Russia imposed by the Russian authorities, the TBC Bank management case, and a reshuffling of the government) have weakened sentiment and will negatively affect growth“, reads the report. 

Investment environment

The World Bank notes that investment contracted as infrastructure projects were completed and FDIs declined.

Georgia attracts $187 mln in FDI in Q2 of 2019

With its stable business environment, Georgia is well placed to attract investors from neighboring countries”, notes the World Bank.

Unemployment and poverty

The Georgian unemployment rate decreased to 12.7 per cent in 2018, which was reflected in a lowering of the poverty rate to 20.1 per cent, notes the report.

2018 data: unemployment rate reaches 15 year low in Georgia

Rural poverty decreased by 3.4 per cent, while urban poverty decreased by 0.6 per cent, says the World Bank. 

In the first half of 2019, the unemployment rate declined further to 12 per cent, reads the report.

Rural poverty remains a challenge. Providing new job opportunities to workers currently employed in low-productivity agriculture—and supporting productivity increases in agricultural production—will be critical to reducing rural poverty”, notes the World Bank.

Inflation and exchange rate of GEL

Annual inflation in Georgia accelerated to 4.9 percent in July due to the weakening of the lari and higher tobacco excise taxes, reads the report. 

In response, the authorities tightened the policy interest rate in early September by 50 basis points to 7 percent, notes the report. 

National Bank of Georgia increases refinancing rate to 7%

National Bank of Georgia increases refinancing rate to 7.5%

With the financing requirement declining and healthy portfolio inflows, the central bank was able to accumulate reserves in the first half of the year despite a drop in FDI...However, sentiments have deteriorated markedly since, resulting in rising pressure on the exchange rate“, notes the World Bank.

National Bank sells $32.8 mln amid Georgian lari devaluation

Georgian National Bank has sold $40 mln amid Georgian lari depreciation

Economic risks 

Georgia is vulnerable to regional developments and the risks associated with a sharp decline in demand for exports of its goods and services or a reduction in remittance inflows”, says the World Bank.

Disturbances in Russia or Turkey could have a negative impact on Georgian tourism and investment prospects, also complicate access to financial markets, thus negatively affect Georgian economic growth.