ISET-PI has updated its forecast of Georgia’s real GDP growth rate for the third and fourth quarters of 2018. Here are the highlights of this month’s release:

Recently, Geostat released the preliminary estimate of real GDP growth for the second quarter (April-June) of 2018, which now stands at 6.0%. This is only 0.1 percentage points above the recent ISET-PI forecast. As a result, real GDP growth for the first seven months of 2018 reached 5.5%.

ISET-PI’s forecast of real GDP growth for the third quarter (July-September) of 2018 stands at 7.2% - the same as last month’s prediction. The first estimate for the fourth quarter (October-December) growth forecast stands at 6.5%.

Based on July’s data, we expect annual growth in 2018 will reach 6.3%. This optimistic forecast is consistent with the evidence coming from the National Bank of Georgia and international development institutions. For example, the National Bank of Georgia revised its expectation for the real GDP growth from 4.8% to 5.5% in 2018. According to the Monetary Policy Report, among the reasons behind the upward revision of the prediction are the improved domestic and external demands due to significant foreign inflows (mainly from export, tourism, and remittances), improved business sentiment, credit growth, and capital spending by the government.

Moreover, the International Monetary Fund (IMF) has also raised its growth forecast from 4.8% to 5.5% in 2018. IMF provided similar findings to the National Bank of Georgia, identifying some other contributors to the real GDP growth: low and stable inflation that allows the Central Bank to carry out expansionary monetary policy, and markedly reduced dollarization of loans and deposits. However, this authoritative institution identified threats coming from deteriorating economic conditions in the region.