Economic growth in Georgia accelerated to 5.4% in 1H18, supported by booming tourism and significantly increased exports and remittances. These flows provided positive spillovers to the major sectors of the economy, but the increased demand also translated into strong import growth and worsened the trade deficit. The growth lost momentum and slowed to an average of 3.3% in July-August, based on GeoStat’s rapid estimates, resulting in 8M18 growth of 4.8%. This slowdown is mostly explained by reduced construction activity due to underspending on government infrastructure projects. Given the current volatility in regional markets and increased external risks, we revise our growth forecast down from 5.4% to 5.0% for 2018. We also expect growth to soften to 4.3% in 2019 mostly due to tighter credit conditions. Importantly, Georgia’s macro fundamentals remain strong given its prudent fiscal and monetary policies and flexible exchange rate. Therefore, we believe that Georgia’s growth outlook remains robust in the face of increased external risks.
Source: G&T
