September 2021 GDP Forecast | Inflation hurts Georgia’s GDP forecast, while recovery of remittances and real exchange rate appreciation make a positive impact
27 September 2021

ISET-PI has updated its real GDP growth forecast for the third and fourth quarters of 2021. Here are the highlights of this month’s release:

Recently, Geostat has released the preliminary estimate of real GDP growth for the second quarter of 2021, which now stands at 29.9%.

The real GDP growth rate reached 9.9% year-on-year in July 2021. Consequently, the estimated real GDP for the first seven months of 2021 amounted to 12.2%.

ISET-PI’s forecast of real GDP growth for the third quarter of 2021 stands at 19.7%. The second estimate for the fourth-quarter growth forecast stands at 22.7%.

Based on July’s data, we expect annual growth in 2021 to be 16.7%. This number is most likely overestimated by the model at the current point in time. This is because of the nature of the shock (a transitory lockdown event and difficult epidemiological situation) in the last three quarters of 2020 and correspondingly abnormally high GDP growth (base effect, increased external demand, and higher commodity prices) in the second quarter of 2021, had not had relevant analogues in the Georgian data. However, the accuracy of the annual growth forecast is expected to improve significantly once the third quarter data becomes available.

In addition, the National Bank of Georgia revised its expectation for real GDP growth up from 4% to 8.5% in 2020. According to the Monetary Policy Report, among the reasons behind the prediction’s upward revision are recovery in external demand (expected improvement in exports of goods, a slightly slower increase in imports of goods and the gradual recovery of tourism exports), fiscal stimulus and credit growth.