ISET

The preliminary statistics released by Geostat reveal that Georgia’s real GDP growth was 4.8% year over year (YoY) in 2018. These results are behind the World Bank’s, IMF’s, ADB’s and NBG’s latest growth projections of 5%-5.5%.

ISET-PI’s leading GDP indicator forecast, made at the beginning of the year, was more precise. At the time, we predicted 4.6% annual growth in the worst-case, “no growth” scenario, and 5.6% in the best case or “average long-term growth” scenario. While, our “middle-of-the road” scenario predicted the exact 4.8% real GDP growth.

According to Geostat’s figures, in the third quarter (Q3) of 2018, Georgia’s real GDP experienced growth of 4% year over year (YoY). Despite the slowdown of the growth rate compared to the previous quarters, IMF recently revised their forecast of economic growth for Georgia upwardly, from 4.5% to 5.0%. Forecasts for other international organizations and the National Bank of Georgia (NBG) remained the same, while ISET-PI, based on October’s data, expect annual growth in 2018 to be 4.6% YoY.

The weakening of regional economic conditions are the main factors negatively affecting the Georgian economy in Q3. Recent developments in Turkey, caused by the US tariffs imposed on Turkish steel, uncertainty around the Central Bank’s policy and its independency, together with an accelerated fiscal stimulus, negatively affected Georgia via lower revenue from trade, remittances and tourism. According to IMF, the sharp depreciation of the Turkish lira and double-digit inflation will deteriorate the economic performance of country in 2019, and furthermore, create downward spiraling risks for Georgia. The average growth rates for other neighboring countries in Q3 2018 have also reduced markedly - 3.9% YoY in Armenia, 1.5% YoY in Russia, and only 0.6% YoY in Azerbaijan.

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