According to TBC Research, after the slowdown in Q3, with an estimated quarterly seasonally adjusted growth of 0.6%, on the back of a stronger external sector, credit and fiscal stimulus, growth appears to have recovered far sooner than anticipated. Traditionally, a stable and appreciating GEL against the USD has also seemingly led to strong consumer and business confidence.
If YoY GDP increases by around 5.5% in Q4 2019, this would equal, approximately, a very strong 2.1% seasonally adjusted QoQ growth and overall 2019 growth of 5.2%. Based on initial estimates in October and November, Q4 2019 growth should be strong. October growth stood at 5.7% while the initial indicators pinpoint even stronger expansion in November.
External inflows were much stronger in November and despite higher interest rates in GEL, lending also accelerated, assuming budget spending broadly similar to previous month, fiscal will also remain strong. 2019 is a year of fiscal stimulus, taking into account the size of the deficit adjusted for advance payments and large capital spending with high multiplier.
“This was balancing for the weakness in tourism industry. While in 2020, the fiscal expansionary effect is expected to be much more moderate, according to the budget project, the external sector contribution should be stronger due to increased tourism inflows as the decline from Russia and Iran dissipates, inflows from Turkey should strengthen, at least to some extent, and the drop in FDI inflows is no longer assumed. Based on the TBC research GDP growth model using inflows, fiscal, credit and imports as inputs, 2020 GDP growth should stand at around 5.0%. Although, considering election related uncertainties, in the baseline scenario we project around 4.5% growth”, TBC Research notes.
