National Bank: Impact of External Shocks Decline

National Bank of Georgia (NBG) has released a statement promulgating that negative risks factors have declined in relation to Georgia.

According to NBG, Georgian economy continues to recover from the external shock, both due to improvements in the domestic and external environment. In particular, the exports of goods and services, together with the money transfers have improved significantly. Moreover, the rise of investments and consumption, improving consumer and business sentiments, fiscal stimulus and increasing loans are positively contributing to the GDP growth.

According to NBG forecast, in 2017, the National Bank of Georgia expects real GDP growth to be 4% (see Figure 1). Nonetheless, compared to the previous period, the negative risks associated with the forecast have decreased, while main trading partners continue to recover. Thus, if the external environment continues the current trend of improvement, GDP growth may exceed 4% in 2017.

“Nevertheless, according to current estimates, the output is still below its potential level; however, the gap is expected to gradually close during 2018 and 2019,” the NBG statement reads.

Inflation tendency remains one of the key challenges in 2017, as the annual inflation rate has increased, and in June it was equal to 7.1%.

According to NBG experts, the impact of these temporary factors will be maintained until the end of the year. According to the NBG forecast with the exhaustion of one-time factors the inflation rate will decline and in 2018 it is expected to be below the target rate of 3%. (cbw.ge)