IMF review: ‘Georgia’s economic performance remains strong’

Georgia’s economic performance remains strong, but downside risks to the outlook have increased, reads the third review of the International Monetary Fund (IMF) of Georgia’s performance under the 3-year Extended Fund Facility (EFF).

The executive board of the IMF completed the third review on 19 December. 

The completion of the review will release about $41.6 million, bringing total disbursements under the arrangement to about $166.3 million.The extended arrangement for about $291.5 million was approved by the executive board on 12 April 2017.

Georgia’s economic performance remains strong, but downside risks to the outlook have increased. Inflation has stayed below the 3% inflation target in 2018, and the external position has strengthened. Higher revenues and lower investment resulted in a fiscal surplus through September 2018. Against the background of high credit growth, the authorities introduced regulations to limit household over-indebtedness.

The banking sector remains well capitalised, liquid, and profitable, but dollarization remains high. Despite the positive outturns, the authorities need to remain vigilant to a deteriorating external outlook and to sustain reform efforts to promote more inclusive growth.

The inflation-targeting framework, combined with the floating exchange rate regime, continues to serve Georgia well. The current monetary policy stance remains appropriate.

Efforts to build international reserves need to be stepped up given heightened external uncertainty and Georgia’s vulnerability to external shocks. Regulations to increase financial resilience are welcome but its impact on credit growth needs to be closely monitored”, read the review.