According to the preliminary statistics released by GeoStat, Georgia’s real GDP contracted by 3.8% year over year (y/y) in Q3 2020. As a result, the estimated real GDP declined by 5.0% in the first nine months of 2020, which is in line with the International Monetary Fund’s (IMF) and National Bank of Georgia’s (NBG) latest projections of -5% y/y (from October and November correspondingly). Meanwhile, based on October’s data, ISET-PI expects lower GDP contraction in 2020, as the forecast stood at -4.4%.
In Q3 2020, the economy showed signs of revival after the lifting of COVID-19-related restrictions. Fiscal spending combined with improved credit activity and increased remittances helped domestic demand to rebound. At the same time, external demand remains weak mainly due to the unprecedented decline in international travel. Increased production costs caused by pandemic-related constraints and disruption in value chains were additional factors responsible for negative growth rates in the reported quarter.
As Georgia is a small open economy, its economic performance strongly depends on what happens in large advanced economies and the main trading partners. After an extraordinarily deep decline in Q2, the global economy improved somewhat in Q3. While economic growth in all major economies remained negative, China’s economy expanded by 4.9% y/y.