ISET-PI has updated its forecast of Georgia’s real GDP growth rate for the second quarter of 2019. Here are the highlights of this month’s release:

ISET-PI’s forecast of real GDP growth for the second quarter of 2017 has not changed and stands at 4.7%. The first estimate of the third quarter growth forecast is at 7.4%.

The real GDP growth rate reached 5.1% year-on-year for April 2019. Consequently, the estimated real GDP for the first four months of 2019 amounted to 4.8%.

Based on April’s data, we expect annual growth in 2019 to be 5.5% in the worst-case or “no growth” scenario, and 5.9% in the best-case or “average long-term growth” scenario. Our “middle-of-the-road” scenario (based on average growth over the last four quarters) predicts 5.6% real GDP growth in 2019.

Sharp ups and downs of the year-on-year growth rate from one quarter to the next are not usual. Typically, quarterly growth rates follow particular patterns, which are captured by ISET-PI’s empirical forecast model. Therefore, the unusually high growth in the first quarter could result in overly optimistic predictions about the next quarter’s performance. Indeed, the forecast for Q3 is largely influenced by the high Q1 actual growth and is expected to overestimate reality. Yet, looking at the economic landscape from the standpoint of the April data, several variables changed significantly and affected growth predictions in different ways. The increase of money supply and significant improvements in external statistics (exports, imports) are the main positive drivers of the optimistic growth figures, while moderately high inflation and credit restrictions had a negative impact on the forecast value.