The Asian Development Bank (ADB) raised Georgia’s 2018 growth forecast to 4.9% from the April estimate of 4.5% reflecting strong growth in tourism and robust investment after an increase in business and investor confidence.
The growth forecast for 2019 is 5.0%, says the update of ADB’s flagship annual economic publication, Asian Development Outlook (ADO) 2018.
“Georgia has made impressive economic progress over the last decade,” says ADB Country Director for Georgia Ms. Yesim Elhan-Kayalar. “We expect the economic performance to remain strong as domestic and external demand continues to strengthen.”
ADB’s latest projections follow the 5.0% gross domestic product (GDP) growth in 2017 and an estimated 5.7% in the first half of 2018. Small firms, in particular, benefitted from a new concessional tax regime featuring lower rates, easier compliance, and automatic refunds for excess payment of value-added tax, as well as a tax liability write-off for defunct firms. On the demand side, higher capital investment fueled growth, as did private consumption that benefitted from an 18.3% rise in remittances in the first half of 2018 over a year earlier.
Inflation slowed from 6.0% in 2017 to 2.8% year on year in July 2018, which was also the average annual rate in the year to date. Core inflation fell below 2.0%. The slowdown reflected inflation easing for food, tobacco, and alcoholic beverages, along with price declines for clothing and footwear and communication services. Further, credit growth moderated to 4.2% in the first half of 2018, prompting the National Bank of Georgia—the central bank—to cut its policy rate to 7.0% in July. The report trims the inflation forecast for 2018 to 3.0% to match the forecast for 2019, which is unchanged.
The current account deficit widened to equal 11.6% of GDP in the first quarter of 2018 as growth in exports trailed that of imports in absolute terms. Exports of goods and services expanded by 23.4% in the quarter, thanks to strengthening external demand and government support for the export sector. In the first half, exports of goods rose by 28.5%. Meanwhile, rising domestic demand, strong growth, and improved business and consumer confidence boosted imports by 22.9% in the first half, notably for consumer and investment goods. With higher-than-expected oil prices and robust public investment, earlier projections for the current account deficit are maintained.
ADB has supported Georgia since 2007 and is one of the country’s largest multilateral development partners. Sovereign and nonsovereign loans to Georgia total $2.72 billion. ADB’s key development priorities in Georgia are to foster inclusive and sustainable economic growth, reduce poverty, enhance regional connectivity, and improve public service delivery.
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 67 members—48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing.