Georgia's real GDP grew by 10.4% in 2021, according to preliminary data issued by the statistics office Geostat on March 21. Last year, GDP at current prices amounted to GEL60.2bn ($18.7bn), which is 22.3% higher than the corresponding figure for 2020.
The country’s economy thus fully reversed the 6.8% contraction seen in 2020 when it dropped to $15.8bn from $17.5bn-17.6bn in 2018-2019. There was growth in the arts, entertainment and recreation sector, manufacturing, transportation and storage, trade, hotels and restaurants, electricity, gas, steam and air conditioning supply, real estate activities, while construction was in a declining state.
Georgia’s economy grew by 14.6% y/y in February, after a 18.0% y/y growth in the previous month, based on Geostat’s rapid estimates. Cumulatively, in 2M22, growth came in at 16.3% y/y. In February, growth was recorded in manufacturing, transportation & storage, electricity & gas supply, hotels & restaurants, real estate, arts, entertainment & recreation and mining sectors.
In its new outlook for Georgia released as part of a spring economic update, the World Bank has cut its 2022 growth forecast for Georgia to 2.5% from the 5.5% it projected pre-Ukraine war, while cautioning that there is considerable scope for further downgrades if the war continues for much longer.
The World Bank said the war in Ukraine is likely to impact the Georgian economy adversely through several channels. The first channel is goods trade. Both Russia and Ukraine are among Georgia’s top 10 trading partners and a key destination for exports, including wine and beverages. The second key channel is tourism. The expected dramatic drop in the arrival of Russian and Ukrainian tourists, who together accounted for 21% of visitors in 2021, will put further strain on a sector that is still reeling from the COVID-19 pandemic. The third channel is remittances, with Russia and Ukraine accounting for over 20% of total remittances. Lastly, said the international financial institution (IFI), elevated commodity prices would also affect Georgia.
Georgian inflation hit 12.8% in April, according to the data of the National Statistical Service of Georgia, which was published on May 3. Annual inflation rate stood at 13.7% in February. Compared to the previous month, consumer prices rose by 1.8%. Georgian experts forecast the inflation rate in Georgia to begin to “decline significantly” from March to April this year.
The Monetary Policy Committee of the National Bank of Georgia (NBG) on March 30 increased its key refinancing rate by 0.5pp to 11%. This decision was mostly driven by the rise in global commodity prices affecting Georgia via high oil prices as well as a wave of monetary policy tightening across the regional countries. NBG stressed that it is keeping the monetary policy stance tight, as increased inflation remains a challenge for Georgia.
There are 14 commercial banks in Georgia, including 13 foreign-owned entities, as of March 31, 2022. Compared to the previous month, the total assets of Georgian commercial banks (in current prices) increased by GEL98.04mn (0.2 percent) and constituted GEL61.79bn in March.
The aggregated net profit of Georgia’s banking system in January-October rose by 38% compared to the same period in 2019, to GEL 1.76bn ($567mn), according to the central bank. In the same period last year, the banks reported GEL85mn net losses, caused by the mandatory provisions set aside for the expected deterioration in the quality of their loans. Since then part of the provisions was released – which contributed to the robust profits in 2021.
On the trade front, the central bank took note of some positive developments including a 27% annual increase in exports in 2021 to $4.24bn. Overall, in 2021, the trade deficit increased by 24% y/y to $5.83bn compared to 2020, as exports were solid and made the biggest contribution.
In March, Georgian exports growth remained strong, growing by 26.3% y/y, while PPI was up 19.3% y/y, brokerage Galt & Taggart reported.
Imports growth also slowed to 15.3% y/y, after growing 54.0% y/y in the previous month. As a result, the trade deficit growth slowed also, up 7.4% y/y to $482.6mn, after a 49.6% y/y growth a month before.
Georgia’s current account deficit fell by 6.4% y/y to 9.8% of GDP in 2021, according to NBG. The improvement in the balance was supported by strong growth in transfers and a recovery in the service balance following a gradual rebound in tourism revenues.
Foreign direct investment in Georgia reached $411.3mn in Q4 2021, a rise from $303.8mn last quarter and a decline of $134.2 a year ago, according to new data released by Geostat. The United Kingdom was the top contributor to FDI.
Moody’s cut the outlook on Georgia’s sovereign 'BA2' credit rating to negative from stable on April 28, warning of risks linked to Russia’s invasion of Ukraine and Tbilisi’s own history of clashes with Moscow.
The rating agency said the decision to change Georgia’s outlook – which effectively puts it on a downgrade warning – reflected the “heightened geopolitical event risks” given Georgia’s “frozen” conflicts with Russia over South Ossetia and Abkhazia.
On the political front, the intelligence service of the Ministry of Defence of Ukraine has accused the South Caucasian countries of Armenia, Azerbaijan and Georgia of negotiating with Moscow on the re-export of Russian products to international markets. Georgian Finance Minister Lasha Khutsishvili refuted Kyiv's "completely incomprehensible" accusation that Georgia is negotiating with Russia on the re-export of Russian products on 2 May.
Georgian Prime Minister Irakli Garibashvili said that from 2 May the mandatory rule of wearing a mask will be relaxed throughout the country. In particular, according to Irakli Garibashvili, from now on the use of masks will be mandatory only in medical institutions and public transport. As of May 2, 1,655,221 cases of COVID-19 infection have been confirmed in Georgia. To date, 1,091 active cases of infection have been registered in the country.
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