The World Bank decided to reduce the economic growth forecast of Georgia. According to the World Bank, in 2023, growth is expected to slow to 4 percent, largely reflecting a base effect from strong growth in 2022, as well as slowdown in economic partners such as the European Union, and diminishing money inflows. In the medium term, growth is expected to stabilize around potential (5 percent).
Inflationary pressures in Georgia have eased in the second half of 2022, while remaining high (at 9.8 percent in December, in annual terms). Inflation is expected to keep declining, albeit slowly, while monetary policy remains tight.
Risks to this outlook are broadly balanced. On the downside, persistent inflation coupled with the tightening of global financial conditions could impact on the lari, potentially affecting macro-financial stability due to the high levels of dollarization.
Tourism and remittances in Georgia could be negatively affected as Russian economy is expected to suffer a more pronounced slump in 2023, due to a protracted conflict and sanctions. On the upside, money inflows could last longer than initially expected, and Georgia could benefit from some trade diversion as transport corridors are reconfigured.
