In December 2016 Economic Growth Rate Saw 0.3% Historical Bottom
According to preliminary estimations, in December 2016, as compared to the same period of 2015, GDP real growth pace made up 0.3%. As to the 4th quarter of 2016, GDP growth rate marked 1.2%, Geostat, the national statistics service of Georgia, reports.
It is worth noting that the Government has failed the 2016 economic growth forecasts. According to Geostat, GDP annual growth made up 2.2%, under the 2016 preliminary estimations. When planning the 2016 state budget, Government determined the GDP growth forecast by 3%. In November-December 2016 Government reduced GDP real growth forecast to 2.7% for 2016. However, under preliminary report, even this forecast failed.
It should be noted that Geostat has published preliminary report for the 2016 economic growth and a final report will be published later.
Despite the preliminary report requires further specifications, even the existing figures are alarming, even more so final and specifed reports do not much differ from early reports, as a rule. Therefore, we do not expect the final rate of economic growth to be more than 2.2% for 2016.
To more precisely outline a slowdown in economic growth rate, we should analyze the history of the past years. Over the past 15 years, excluding the 2009 global financial crisis period, the country’s economic growth pace had never dropped below 2.2%. In 2008, the year of Georgia-Russian military conflict, economic growth marked 2.4%.
Extremely low indicator of economic growth that was registered in the 4th quarter of 2016, was 1.2% and this is the worst indicator over the past 15 years, excluding the 2009 year and the last two quarters of 2018.
It is worth noting that the low economic growth of the past years declined more in the fourth quarter of 2016 and it did not exceed 2% in autumn, while in December the figure dropped to 0.3%. If the economic growth pace continues declining in 2017, Georgian economy may sink into recession, for the first time after 2009. Taking into account the past years have not recorded any large-scale financial crisis in the world, we should seek GDP growth pace slowdown reasons within our country. If government does not change its attitude towards economy and does not take real effective steps throughout 2017, GDP growth pace will drop below zero and it will take much time and many other resources will be required to get rid of recession.
Government’s economic policy cannot withstand criticism. The fact GDP annual growth pace has dropped below 2.2% clearly points to serious problems in the economy. It is the second year that GDP annual growth pace remains under 3% (2.9% in 2015).
This signifies that Georgia will need 100-150 years to reach the living level of averaged EU country, while in reality we need twice and triple faster economic development than current developed countries to become a genuinely developed country. However, economic growth paces of the past 2 years will not enable us to maintain even the existing status quo and the country will lose even the current economic positions.