September 2014 | Macro economic review
08 September 2014

After a dip in April, the GDP growth rate seems to be back on track, the year-on-year growth rate in July was 7.2%. Higher rates of electricity consumption and an increase in the change of VAT payers’ turnover corroborate this evidence. In July electricity consumption and VAT payers’ turnover were 3.8 and 15.4 percent higher compared to the same month in the previous year.

However, the optimistic growth data is not reflected in the consumer sentiment, as captured by the CCI index. In particular, after a slight increase between April and June this year, the CCI Present situation index fell in July and continued falling in August. Why are consumers not feeling the benefits of higher growth? One has to keep in mind that a significant share of the population in Georgia is employed in agriculture (typically, subsistence farming), while the GDP growth is driven largely by trade and manufacturing sectors, which command a significant share of GDP  together about 40%, but a much lower share of the overall employment in the country. Therefore, the gains in these sectors are unlikely to be immediately reflected in the gains of the self-employed rural population.