On 3 April, the Asian Development Bank (ADB) delivered its forecast for the impact of the coronavirus pandemic on the Georgian economy.
The forecast stated that Georgia will experience a substantial slowdown in 2020 due to the COVID-19 pandemic and lower oil prices. A recovery is expected in 2021 as a result of higher domestic demand, increased foreign direct investment, and a rebound in workers’ remittances. It further emphasizes that Georgia’s gross domestic product (GDP) growth will decline to 0% in 2020 as the impact of COVID-19 and lower oil prices constrain consumption and limit expansion in tourism and trade, but that Georgia’s economy is expected to bounce back with a 4.5% growth in 2021.
Gains in retail trade and higher government spending on education are forecast to boost services by 1.1% in 2020. The figure is projected to rise to 6.3% in 2021 as tourism recovers. Growth in industry, meanwhile, is projected to contract to 3.1% in 2020 due to a slowdown in construction and manufacturing, before recovering to 2.1% in 2021 with higher mining output.
Inflation was projected to slow to 4.5% in 2020 and 3.0% in 2021—in line with the central bank’s target—as a result of the introduction of administered prices on food.
Georgia’s external prospects will depend heavily on developments in its trading partners. The current account deficit is projected to narrow further to 4.4% of GDP in 2020 and 4.2% in 2021, with a continued decline in imports as much lower oil prices help trim the trade deficit.
Exports were projected to grow by 3.6% in 2020 and by 11.9% in 2021, while modest domestic expansion and higher FDI are expected to raise imports by 1.1% in 2020 and by 7.0% in 2021.
Risks to economic growth include greater than expected sluggishness in trading partners’ economies, weaker than expected domestic demand, slower growth in tourism revenues, and tighter liquidity in global financial markets, in part reflecting the impact of COVID-19.
The ADB report also highlighted the need for Georgia to promote technological innovation for business development. While the country has made tangible progress in creating innovative digital services, the government can make electronic commerce more trustworthy and viable by improving legal and regulatory frameworks while creating more efficient mechanisms for setting taxes and tariffs. The government should also continue reforms in education and improve familiarity with digital technologies, particularly in rural areas, to make growth more inclusive.
The Asian Development Bank is a regional development bank established on 19 December 1966 to promote social and economic development in Asia. The bank has 68 member states. ADB’s key development priorities in Georgia are to foster inclusive and sustainable economic growth, reduce poverty, enhance regional connectivity and improve public service delivery. Priority sectors include transport, water supply and sanitation, energy, public sector management and finance. ADB has partnered with Georgia since 2007 and is one of the country’s largest multilateral development partners. Over $2.8 billion has been approved for Georgia’s development since 2007. This includes $1.4 billion from regular ordinary capital resources (OCR), $902 million from concessional OCR, $455 million in non-sovereign lending, $17 million in technical assistance, and trade finance.
