Quarter 3 2019, Macro Review | Georgia’s external demand and projected GDP growth remain strong – for now. But headwinds from the global economic slowdown pose a real threat
27 November 2019

According to the preliminary statistics released by GeoStat, Georgia’s real GDP growth constituted 5.7% year over year (y/y) in Q3 2019. As a result, estimated real GDP growth for the first nine months of 2019 amounted to 5.0%, which is above the National Bank of Georgia’s (NBG) growth forecast for 2019 (the forecast remained unchanged at 4.5%). Meanwhile, based on September’s data, ISET-PI expects annual growth in 2019 to be 4.9%.

The economic growth in Q3 2019 was driven by increased external demand, which stimulated net exports of goods and services, and strong fiscal stimulus. A rise in remittances also positively affected the economy, while lower revenues from international travellers caused by the Russian ban on air travel to Georgia hindered economic growth in the reported period. Data on foreign direct investment (FDI) for Q3 is not available yet. However, we expect the negative trend in FDI to continue in the second half of the year. Furthermore, lower inflows of foreign currency from tourism and FDI caused the recent depreciation of the lari against the currencies of major trading partners, resulting in increased prices of imported products, and a higher inflation rate.

Despite the strong external demand in Q3 2019, risks that emerged from the slowdown of the global economy could harm GDP growth in the future. According to the IMF, “Global growth is forecast at 3.0 percent for 2019, its lowest level since 2008-09 and a 0.3 percentage point downgrade from the last World Economic Outlook”.  Trade tensions between the USA and China escalated, resulting in slowing economic activity in these countries; uncertainties surrounding “Brexit” and sluggish economic growth in the EU are the main global factors that contain risks in the downward direction for Georgia.