IMF leaves Georgia's economic growth forecast unchanged at 4.6%

The International Monetary Fund (IMF) mission completed a visit to Georgia and published a summary of its work. According to the head of the mission, Mercedes Vera-Martin, Georgia is pursuing a sensible macroeconomic policy, forecasting 4.6% economic growth in Georgia this year.

“The team maintains its GDP growth forecast for 2019 at 4.6 percent, while inflation is projected at 5.4 percent at end-2019. Inflation is projected to converge to the 3-percent target in 2020 as monetary conditions tighten,’ the organization said.

IMF also noted that the current account deficit is projected to narrow by almost 2 percentage points of GDP, to 6 percent of GDP in 2019.

“With increased downside risks to the outlook, including those arising from global trade tensions, safeguarding foreign exchange reserves now will help mitigate the impact of potential future shocks,” it added.

The statement also reads that 2019 growth remains robust, highlighting the resilience of the Georgian economy and that the National Bank of Georgia (NBG) has appropriately raised the policy rate to address inflationary pressures.

Vera-Martin commented that Georgia’s economic fundamentals remain strong. Despite a less supportive economic environment, preliminary estimates suggest higher-than-envisaged economic activity in 2019H1, with growth at around 5 percent.

She also noted that higher inflation in August (4.9 percent y/y) reflected an excise tax increase, higher food prices, and national currency GEL depreciation.

The IMF mission head said they welcome the Georgian authorities’ continued commitment to prudent macro policies and structural reforms, adding the NBG appropriately raised its policy rate by 50 basis points in September and signaled further rate hikes if inflationary pressures persist.

“The team also welcomes the government’s continued efforts in structural reforms to support higher and more inclusive growth, including those related to advancing the education reform,” the statement reads.

The IMF believes that the government should proceed with the implementation of the Pillar 2 pension reform.

The IMF team led by Mercedes Vera-Martin visited Tbilisi during September 11-17, 2019 to discuss recent economic and financial developments and progress of the carried out structural reforms. They held meetings with the Georgian Prime Minister Giorgi Gakharia and members of the Cabinet, also the National Bank Head Koba Gvenetadze.

In general, the IMF praised the positive trend of economic indicators in Georgia - sustainability of economic growth rate, improved current account deficit and other macroeconomic parameters of the country.