July 2020 GDP Forecast | The perfect storm: trade, tourism, inflation indicators deteriorate dramatically, while remittances are quick to recover
23 July 2020

ISET-PI has updated its real GDP growth rate forecast for Georgia for the second and third quarters of 2020. Here are the highlights of this month’s release:

Geostat has revised its rapid estimate of real GDP growth for the first quarter of 2020. The estimated growth now stands at 2.2%, which is 0.7 percentage points above the average growth rate previously estimated for Q1.

The real GDP growth rate contracted by 16.6% and 13.5% year-on-year in April and May 2020, respectively. Consequently, the estimated real GDP for the first five months of 2020 amounted to 5.4%.

ISET-PI’s forecast for the second quarter of 2020 now stands at 2.7% – up from 2.0% in May. The third-quarter growth forecast currently stands at 3.2%. The forecast, based on past and current data, does not yet fully account for the negative impacts of the COVID-19 pandemic on the national economy, thus, overestimates the reality.

Based on the data from May, we expect the annual growth in 2020 to be 2.8% in the worst-case or “no growth” scenario, and 3.2% in the best-case or “average long-term growth” scenario. Our “middle-of-the-road” scenario (from the average growth over the last four quarters) predicts 3.0% real GDP growth in 2020. These scenarios are based on the current data and, again, do not fully reflect the expected impact of the pandemic.

Moreover, the National Bank of Georgia (NBG) has released its annual growth forecast for 2020, with the number now standing at -4.0%. The main factors behind GDP contraction are a decline in both external and domestic demand, reduced revenues from export, remittances, tourism, and weak domestic demand, especially for long-term consumption goods and services.