The Governor of the National Bank, Koba Gvenetadze, said last week that there were signs of overheating in the Georgian economy. According to him, 10.3% economic growth in the country in eight months exceeded the potential level.
Galt & Taggart's economist Lasha Kavtaradze spoke on this issue and shared the opinion of the National Bank and stated that if the third flow of migrants enters the country, the signs of overheating would become even more real.
"When the NBG says that the economy is in an overheating phase, it is a deviation of the actual economic growth from the potential level... We know that we have 10.2% growth in 9 months. Our potential level is within about 5% and this deviation gives NBG a reason to say so. If we look at the forecasts of the National Bank and the government, economic growth will drop below 5% next year. This means that the growth of the economy will return to its level.
But if we have a third wave of migrants, and it accelerates demand, actual economic growth could again deviate from the potential rate. This will put pressure on the prices, and the same real estate market participants may raise prices even more. This creates certain dangers that the prices will increase and the National Bank will have to tighten the monetary policy even more. As a result, after these risks are realized, we will have an even higher drop in economic growth," Kavtaradze explained.
