RECENT ECONOMIC DEVELOPMENTS
Georgia is experiencing an economic recovery in 2017 on the back of stronger growth in the United States, Europe, and Russia. Exports rose by 30% in the first half of 2017. Similarly, remittances recovered significantly (by 20% year-on-year [y-o-y]), with a positive impact on the nontradable sectors. Pulled by the resulting boost in domestic demand and net exports, real GDP grew by 4.9% in the first six months of the year (y-o-y).
The recovery in exports and remittances, along with an accelerated adjustment of imports, helped to narrow the current account deficit from 13.5% of GDP in the first quarter of 2016 to 11.8% in the same period of 2017. Foreign direct investment (FDI) financed nearly 93% of the deficit. The external debt stock rose by 6.6% (y-o-y) by end-March 2017, driven by the higher external financing needs. However, external debt still declined in terms of GDP, standing slightly above 100% of GDP.
Fiscal policy was expansionary in the first half of 2017. To support growth, the Government boosted capital spending by 32% and current spending by 7%. Nevertheless, the fiscal deficit narrowed as revenues overperformed, increasing by 18% y-o-y in the same period. The sharp increase in excise tax rates beginning in January 2017 contributed to the solid tax collections.
The National Bank of Georgia (NBG) raised the monetary policy rate twice in six months of 2017 (by 50 basis points) to tackle rising inflation expectations. Annual inflation increased to 5.7% by end-August, largely reflecting the effect of higher excise taxes. The NBG expects this effect to expire by early 2018, with inflation returning to its target by the end of that year.
Prudent banking supervision reinforced banking sector stability. The sector has remained profitable, yielding a return on assets of 3% and a return on equity of over 20% as of end-June 2017.
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Georgia
Click here to read the full economic outlook by the World Bank for October 2017.
Pulled by the resulting boost in domestic demand and net exports, real GDP grew by 4.9% in the first six months of the year.
Country Facts
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