The fiscal deficit is expected to widen on the back of lower tax revenues and fiscal support measures provided to support those impacted by the shock - reads the statement issued by Mercedes Vera-Martin after a virtual review mission of the IMF.
“The easing of the fiscal stance has appropriately supported economic activity and protected jobs this year. Despite lower revenues, the government expanded spending to minimize the economic and social impact of the crisis. Among the measures, wage subsidies, cash transfers to households, including those in the informal sector, expanded social transfers, and temporary tax reliefs for businesses have helped sustain activity. Smoother execution of the budget helped accelerate public investment and VAT refunds,” – the IMF said, adding that as a result, the fiscal deficit is projected to reach 8.7% of GDP in 2020.
From now on, the Fund believes that the 2021 Budget continues to appropriately support the recovery while laying the groundwork for fiscal consolidation, and the deficit is projected at 7.6% of GDP next year. “It includes higher healthcare spending and measures to support households and businesses that would help solidify the economic recovery in the context of heightened uncertainty” – the statement issued by Mercedes Vera-Martin reads.
According to the IMF, staff welcomed the authorities’ commitment to medium-term fiscal sustainability as directed by Georgia’s fiscal rule, which will bring the fiscal deficit under 3% of GDP and public debt under 60% of GDP by 2023. “The authorities continue to proactively monitor fiscal risks associated with energy purchasing power agreements and state-owned enterprises” – the IMF concluded.
