IMF Staff Concludes Staff Visit to Georgia

IMF News, August 28, 2018

Source details

Press Release No. 18/334; mission dates: August 21-27, 2018.
Team led by Ms. Mercedes Vera-Martin; visit to Tbilisi to discuss recent economic and financial developments and progress with structural reforms.
Statement clarifies: views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

Growth in the first half of 2018 reached 5.7 percent, supported by robust external demand, remittances, and credit.
IMF revised 2018 GDP growth projection upward from 4.8 percent to 5.5 percent as a result of stronger-than-expected economic activity.
Inflation stood at 2.8 percent in July, below the end-year target of 3 percent.
National Bank of Georgia (NBG) started to normalize monetary policy by decreasing its policy rate by 25 basis points.
Deposit and loan dollarization continue to decline.
Preliminary estimates suggest a better-than-expected budget performance through June.

Strong economic activity and weaker terms of trade are expected to widen the current account deficit.
Downside risks to the outlook have increased, driven by regional developments and global trade tensions.
Policy implications emphasized:
- Build up reserves.
- Continue exchange rate flexibility, which has served the country well.
- Maintain prudent macroeconomic policies to bolster resilience to external shocks.

Authorities’ reforms welcomed; sustained implementation will support higher and long-lasting growth, and increase resilience.
Specific reform actions noted:
- Established an independent pension agency.
- Adopted regulations to implement the new public private partnership law.
- Progress toward modernizing the insolvency law and regulations to promote responsible lending.
Policy objective: 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 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.
Team looks forward to continuing the dialogue during the visit for the third review of Georgia’s IMF-supported program in October.

International Monetary Fund