The economy of Georgia will recover from the impact of COVID-19 in 2021 with 4.5 per cent growth after experiencing a substantial slowdown in 2020 due to the pandemic and lower oil prices, reads the Asian Development outlook, a financial publication of the Asian Development Bank (ADB).
The ADB projects gross domestic product (GDP) growth to decline to 0 per cent in 2020 in Georgia as the impact of COVID-19 and lower oil prices constrain consumption and limit expansion in tourism and trade.
As a leading reformer, Georgia has already taken measures to soften the economic shock of the pandemic, such as imposing a moratorium on collecting property and income taxes in the hospitality sector, easing bank lending regulations, and increasing spending on infrastructure, among others. The country can lay a foundation for fast recovery by further supporting private sector development and investing in technological advancement, science, and digital education", said ADB Country Director for Georgia Shane Rosenthal.
Gains in retail trade and higher government spending on education are forecast to boost services by 1.1 per cent in 2020. The figure is projected to rise to 6.3 per cent in 2021 as tourism recovers. Growth in industry, meanwhile, is projected to contract to 3.1 per cent in 2020 due to a slowdown in construction and manufacturing, before recovering to 2.1 per cent in 2021 with higher mining output.
Inflation is projected to slow to 4.5 per cent in 2020 and 3 per cent 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 with its trading partners. The current account deficit is projected to narrow further to 4.4 per cent of GDP in 2020 and 4.2 per cent in 2021, with a continued decline in imports as much lower oil prices help trim the trade deficit.
Exports are projected to grow by 3.6 per cent in 2020 and by 11.9 per cent in 2021, while modest domestic expansion and higher FDI are expected to raise imports by 1.1 per cent in 2020 and by 7 per cent in 2021.
The ADB report highlights 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", read the IDB report.
The government should also continue reforms in education and improve familiarity with digital technologies, particularly in rural areas, to make growth more inclusive, suggests the ADB.