Ministry of Finance raises GDP forecast to 7.7% in 2021
By Natalia Kochiashvili
Tuesday, July 6
The Minister of Finance, Lasha Khutsishvili, presented the amendments to the current budget at the government session on 5th of July. According to the amendments to the 2021 budget, the state budget revenues will increase by GEL1,175 million, while taxes will increase by GEL1, 114.3 million.
The main financial document of the country envisions the increase in healthcare expenditures in the management of COVID-19 increase by GEL446 million; GEL75 million will be allocated for doubling social assistance for children; GEL35 million will be additionally allocated for the provision of IDP houses; Funding for agricultural support programs will increase by GEL177 million; In addition, GEL55million is provided to support the productive sectors of the economy; GEL220 million will be allocated for the improvement of municipal infrastructure; Education funding will increase by GEL40 million, while sports funding will increase by GEL30 million; GEL30 million more will be provided to the Ministry of Defense, which is necessary for the ‘smooth implementation of the commenced projects.’
On the background of increased May and June figures and positive economic expectations given the lift of covid-related regulations, Khutsishvili presented the updated forecast for real economic growth in 2021 which is 7.7%, and the nominal GDP - GEL57.2 billion.
As he noted, the budget changes are aimed at achieving 3 main goals:reducing the deficit, promoting economic recovery and managing COVID-19 and related health care measures.
The Finance Minister said that according to the draft amendments, the budget deficit rate will be reduced to 6.9% of GDP, while the government debt ratio will be reduced to 54.6% of GDP.
“Given that the initial budget for 2021 was mainly focused on financing anti-crisis measures, the proposed changes provide for increased funding for programs to help rebuild the economy. The budget changes envisage an increase in funding for infrastructure projects, as well as funding for programs supporting the agricultural sector and the productive sector of the economy,” Khutsishvili clarified, noting that amendments provide additional funds to finance the costs of treatment, vaccination and pandemic management in general.
The Minister also informed that these parameters are based on the baseline scenario of economic development (GDP growth of 7.7%), but along with the budget, there is an optimistic scenario, the probability of which is quite high. In such case, economic growth will exceed 10% and will reach GEL58.8 billion in nominal terms, while the budget deficit and debt ratio to GDP will be further reduced to 6.2% of GDP and 53.1% of GDP, accordingly.
