The World Bank (June 2021) estimates that global GDP growth will reach 5.6% year over year (y/y) in 2021. Though thus rebound is uneven, with growth concentrated mainly in advanced economies and developing countries set for a slower recovery. This is driven by unequal access to vaccines, different paces lifting virus containment restrictions, and the scale of fiscal support to the economy. This year the United States and Euro area are projected to expand by 6.8% and 4.2%, respectively, while the Chinese economy is expected to grow by 8.5%. In addition, Georgia’s neighbors are each projected to show moderate growth this year: Armenia (+3.4% y/y), Azerbaijan (+2.8% y/y), Russia (+3.2% y/y), and Turkey (+5% y/y). While a recent World Bank assessment forecasts Georgian annual real GDP growth at 6% y/y in 2021 – up 2 percentage points (pp) compared to January’s projections. At the current pace, most economies will recover to 2019’s GDP per capita level by 2022. However, the emergence of more deadly and resistant variants of the virus create new uncertainties and further risks to global growth.
According to Geostat’s latest GDP growth estimates, Georgia’s economy contracted by 4.5% y/y in the first quarter of 2021, once again reflecting the impact of COVID on the economy. Despite strong fiscal stimulus and a rebound in the external sector, pandemic-related restrictions drove growth into negative territory compared to last year’s pre-pandemic period. Reductions in tourism revenue and foreign direct investment (FDI), coupled with a decline in domestic demand, were the main channels the pandemic affected the Georgian economy in Q1 2021. The full impact of COVID-19 on the economy was uneven: sectors unrelated to tourism showed double-digit annual growth (e.g., mining, manufacturing, financial and insurance activities, information and communication, etc.), while tourism-related sectors (especially accommodation and food services) showed a significant annual decline in Q1.