Galt&Taggart published Georgia's economic outlook and keysector overview. According to the document, Georgia has a strong growth outlook as the country starts 2024 on a high note, having achieved EU candidacy status, bolstering consumer and business confidence.
5.4% GDP growth in 2024 with potential upside
In 2023, Georgia's GDP continued its solid growth, expanding by 7.0% in 10M23. The primary driver of this growth was investments, with solid external inflows also playing a significant role. We expect growth of 5.4% in 2024 and see upside potential for 6.0% growth.
100bps rate cut in 2024
Inflation fell sharply in 2023, enabling the central bank to cut key rate by 150bps to 9.5%. We expect inflation to remain close to the target and anticipate average inflation at 3.5% in 2024. This will allow the central bank to cut key rate by 100bps to 8.5% by the end of 2024.
Appreciation potential for GEL in 2024
The expected solid external inflows and low current account deficit lead us to expect the GEL to remain stable at around 2.7 against the dollar and 3.0 against the Euro in 2024. We do not rule out a 2% appreciation of the GEL in our upside scenario.
According to G&T, they anticipate a growth rate of 5.4% in 2024 in our baseline scenario and 6.0% in upside scenario.
In the baseline 5.4% growth scenario for 2024, thier assumptions include:
- FX inflows to remain solid, including tourism revenues at US$ 4.5bn.
- Average inflation at 3.5%, enabling the central bank to continue easing and cut the key rate by 100bps to 8.5% by end-2024, compared to 9.5% at the end2023.
- With strong fundamentals and a favorable current account deficit (expected at 4.3% of GDP), we maintain a positive outlook on GEL, anticipating an average exchange rate of 2.7 against the dollar and 3.0 against the Euro in 2024.
In the upside scenario, G&T expects 6.0% growth for 2024, assuming faster growth in tourism arrivals and a larger
boost to consumer and business sentiments from EU candidacy status, compared to our baseline assumptions.
G&T expects:
* Tourism revenues at US$ 4.8bn.
* A stronger GEL, at average 2.65 vs the dollar.
* Lower inflation (3.0%) and more substantial rate cuts (8.0% at the end of 2024).
"Risks to growth may come from regional geopolitical conflicts as in previous years as well as globally tight financial conditions. However, Georgia's rebuilt fiscal buffers and replenished international reserves provide a solid foundation to effectively manage potential shocks", - the document reads.
