Back on Track: Positive Economic Sentiments Aligned with Stronger Growth Prospects
Tuesday, 14 June, 2016

On June 15, 2016, ISET held a press conference to discuss recent economic indicators of Georgia. In the second quarter of 2016, the two most important economic barometers of consumer and business sentiment in Georgia – the Business Confidence Index (BCI) and the Consumer Confidence Index (CCI) continued to steadily improve.

In terms of business sentiment, the second-quarter increase in the index was mostly driven by a significant improvement in actual business performance. Q2 results extend the rally in business expectations which was triggered by the appointment of Giorgi Kvirikasvhili as Georgian PM (see, BCI Q1, 2016).

Overall, the BCI gained 10 points (on a [-100/100 scale]) compared to Q1 2016. The expectations of the private sector in Georgia improved and reached 46 index points (up from 38 points in Q1). Business performance over the past three months increased significantly and became positive, rising from -0.7 to 19.7, indicating a rise in production/turnover/sales. The performance of the past three months alongside improved expectations thus maintained the overall BCI at a stable, optimistic level and trend.

The Consumer Confidence Index gained 9 points (on a [-100/100 scale]) from January to June 2016. Although overall consumer sentiments remain at a low level, the improvement of the index since January 2016 has been significant. Both people’s assessments of their current economic situation and expectations have been increasing steadily and equally over the period. Greater perceived economic stability is one of the main reasons behind the improvement of the CCI. Specifically, we see an increase in positive assessments related to both present and expected (i) price levels, (ii) unemployment levels, and (iii) assessments of the general economic situation.

In addition, the ISET-PI GDP forecast suggests that annual growth in 2016 is likely to reach 3.4%. This is the “middle-of-the-road” scenario for Georgia. In the worst-case scenario, annual growth could be 2.7%, while in the best case we should expect 4.1% real GDP growth. The currently forecasted GDP growth for the second quarter of 2016 is 4.2%. There were no evident “red flags” among the economic indicators that go into the GDP forecast model and most of the variables showed remarkable stability in March. However, we also saw a continuing trend towards deposit dollarization – people preferred to put money into dollar deposits rather than into lari deposits – despite the fact that the lari appreciated against the USD in recent months.


ISET’s quarterly BCI survey is jointly implemented since December 2013 by the ISET Policy Institute and the International Chamber of Commerce with BIA support. It measures business confidence for seven key sectors: 1) services, 2) retail trade, 3) agriculture, 4) manufacturing industry, 5) financial service 6) construction and 7) other sectors. A total of 370 Georgian businesses took part in the last survey.

ISET’s Consumer Confidence Index (CCI) follows the standard EU methodology to assess how consumers feel about the overall state of the economy and their personal financial situation. By reflecting consumers’ subjective feelings, the CCI serves as an important predictor of macroeconomic performance. The survey is administered via telephone to a random sample of 300-350 Georgians.

ISET’s GDP forecast incorporates more than 100 time-varying indicators of economic activity, including trade, electricity consumption, and international arrivals. For each quarter, ISET-PI produces five consecutive monthly forecasts (or “vintages”), which increase in precision as time goes on.