Press Release No. 18/334

IMF Staff Concludes Staff Visit to Georgia

August 28, 2018

• 2018 growth projection was revised upward to 5.5 percent as a result of stronger than expected economic activity.
• Downside risks to the outlook have increased, driven by external developments. This calls for continued exchange rate flexibility and prudent macroeconomic policies.
• Sustained implementation of the authorities’ reform agenda will support higher and long-lasting growth, and increase the resilience of the economy.

An International Monetary Fund (IMF) team, led by Ms. Mercedes Vera-Martin, visited Tbilisi during August 21-27, 2018 to discuss recent economic and financial developments and progress with structural reforms. At the end of the visit, Ms. Vera-Martin issued the following statement:

“Economic activity strengthened further in the first half of 2018. Growth reached 5.7 percent, supported by robust external demand, remittances, and credit. Preliminary estimates suggest a better-than-expected budget performance through June. Inflation, which stood at 2.8 percent in July, has been below the end-year target (3 percent). With inflation expected to remain subdued, the National Bank of Georgia (NBG) started to normalize monetary policy by decreasing its policy rate by 25 basis points. Meanwhile, deposit and loan dollarization continue to decline.

“Considering the stronger economic activity, the GDP growth projection for 2018 was revised upwards from 4.8 percent to 5.5 percent. The strong economic activity and weaker terms of trade are expected to widen the current account deficit. Increased downside risks to the outlook, driven by regional developments and global trade tensions, call for building up reserves and continued exchange rate flexibility, which has served the country well; and prudent macroeconomic policies to bolster resilience to external shocks.

“The team welcomed the progress made by the authorities in implementing structural reforms and ongoing initiatives, and stressed the need for continued efforts to support higher and more inclusive growth. The authorities have established an independent pension agency and adopted regulations to implement the new public private partnership law. They are also making progress toward modernizing the insolvency law and regulations to promote responsible lending. The current economic environment offers an opportunity to advance structural reforms to increase economic resilience, boost private-sector led growth, diversify the economy, and improve the living standards of Georgian citizens.

“The team is grateful to the authorities for open and constructive discussions during the visit. The team met with Governor of the National Bank Gvenetadze, Minister of Finance Matchavariani, Minister of Infrastructure Tskitishvili, other senior officials, and representatives of the private sector and development partners. We look forward to continuing the dialogue during the visit for the third review of Georgia’s IMF-supported program in October.”