TBC Capital raised Georgia's economic growth forecast from 5.5% to almost 8%.
Expectations are improved for the growth of tourism, remittances, lending, foreign direct investments and imports. In terms of exports, there is only a slight improvement compared to the previous prediction. The budget deficit is even lower.
According to TBC Capital, the direction of inflation is still problematic. Namely, previous forecast of 9.5% for the end of the year is slightly but still increased, albeit on the condition that GEL will strengthen further during the year.
In terms of monetary policy, despite the high inflation, further tightening is not expected. The reason for this is the pressure exerted on prices by supply.
"Further increase of the GEL hinders the larization process. In addition, it should be noted that in our opinion, the tightening in GEL is not necessary to hinder economic growth. In particular, in addition to the effect of foreign currency lending, the strengthening of the lari improves consumer and business sentiment, and thus, accelerates economic growth at least in the short run.
In turn, foreign exchange inflows are already strong, and even without further tightening of lari, we think this is the baseline scenario. In terms of the average exchange rate of the GEL, in our opinion, there are no signs of over-strengthening today.
At the same time, we still maintain the assessment that the likelihood of a sharp strengthening of the lari against the dollar is relatively low in the near future”, - the report reads.
