ISET

According to the preliminary statistics released by GeoStat, Georgia’s GDP in Q1 of 2017 grew by 5.0% YoY – the highest growth rate since Q3 2014. What lies behind such spectacular growth numbers? First and foremost, it stems from the genuine improvement in the economic situation in the region, which has resulted in increased exports, FDI, tourism, and remittances. Secondly, the sharp increase in the growth rate in December 2016 “lifted” the GDP base and allowed normal GDP improvements to look even better compared to last year’s levels. In April, however, the real GDP growth rate fell sharply to 2.1% YoY, somewhat dampening hopes for swift growth in 2017.

Sharp rises and falls of the year-on-year growth rate from one quarter to the next are not usual. Typically, quarterly growth rates follow particular patterns, which are captured by ISET-PI’s empirical forecast model. Therefore, the unusually high growth in the first quarter could result in overly optimistic predictions about the next quarter’s performance. Indeed, according to ISET-PI’s recent GDP growth forecast, predicted growth in the second and third quarters of 2017 stood at 5.8% and 6.9% respectively.

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According to the preliminary statistics released by GeoStat, Georgia’s real GDP growth was 2.2% year over year (YoY) in 2016. This result fell behind the World Bank’s, IMF’s and EBRD’s last growth projections of 3.4%. The NBG’s 3.5% growth projection from November also overestimated Georgia’s economic growth in 2016.

The ISET-PI annual GDP growth forecast made in June was more realistic. At that time, we predicted a 2.7% annual growth rate in the worst-case scenario, and 4.1% in the best-case. However, in November, as growth rates slowed down, the ISET-PI GDP forecast predicted 2.7% YoY growth in 2016.

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