How will coronavirus impact the Georgian economy?
3 possible scenarios from PMCG
In the optimistic scenario PMCG forecasts a 6.3% decrease in the total number of employed persons in Georgia, while job losses are forecast to be greater in the less pessimistic scenario (-9.8%) and in the very pessimistic scenario (-14.4%). Photo: Nino Alavidze/Agenda.ge.
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PMCG Research has developed three possible scenarios for the development of the coronavirus crisis in Georgia, each of which correspond to different periods of time for which containment measures remain in place.
Scenario I: Optimistic
Economic activity completely stalls for 2.5 months, and then partially stalls for a further three months. Consequently, economic activity partially resumes by the start of June and fully resumes by the start of September.
Scenario II: Less pessimistic
Economic activity completely stalls for four months, and then partially stalls for a further three months. Consequently, economic activity partially resumes by the middle of July and fully resumes by the middle of October.
Scenario III: Very pessimistic
Economic activity completely stalls for six months, and then partially stalls for a further three months. Consequently, economic activity partially resumes by the middle of September and fully resumes by the middle of December.
PMCG says that if the optimistic scenario proves true, Georgia’s real economy is expected to shrink by 4.3 per cent, which would be more severe than in 2009 (-3.7%). Should the less pessimistic scenario play out, the Georgian economy is expected to decrease by eight per cent while in the event of the very pessimistic scenario becoming reality, the expected fall is 12.9 per cent.
For all three of the proposed scenarios, PMCG has identified the five sectors likely to be most affected and the five sectors likely to be least affected.
The following five sectors are expected to be the most severely affected:
- Arts
- Entertainment and recreation
- Accommodation and food services
- Transport and storage
- Wholesale and retail trade
The five sectors expected to be least affected are:
- Information and communication
- Human health and social activities
- Professional, scientific and technical activities
- Public administration
- Mining
Employment/unemployment according to 3 scenarios
In the optimistic scenario PMCG forecasts a 6.3 per cent decrease in the total number of employed persons in Georgia, while job losses are forecast to be greater in the
less pessimistic scenario (-9.8%) and in the very pessimistic scenario (-14.4%).
Regarding the average unemployment rate in 2020, in its optimistic scenario, PMCG expects an increase of 14.1 per cent, while for the less pessimistic scenario the expected increase is 17.7 per cent and for the very pessimistic scenario it is 22.7 per cent.
Additionally, it is likely that the negative impact of the pandemic will change the structure of the labor force in Georgia. The self-employed, which represented 44 per cent of the Georgian labour force in 2019, will be particularly vulnerable to the changes, said PMCG.
Despite a state of emergency, economic activity continues in Georgia except for Marneuli and Bolnisi municipalities in eastern Georgia where a strict quarantine regime has been imposed after a local, 62-year-old woman tested positive for COVID-19 came into contact with more than 80 locals.
The impact of the coronavirus is rippling through the Georgian economy, but it might take a few months to fully see the fallout in data that track economic performance in Georgia.
Georgia will spend 3.5 billion (about $1.10b/€1.02b) on its coronavirus anti-crisis plan, Georgian Prime Minister Giorgi Gakharia announced earlier today. "For now, the country will spend GEL 3.5 billion on managing the crisis, of which 1.035 billion GEL will be directed at social support of citizens, 2.11 billion GEL will be directed at the economy and entrepreneurs, while 350 million GEL will be spent on the health care of each citizen", Gakharia said.
Georgian economic growth may drop to between -6 per cent to 2.1 per cent this year due to the new coronavirus crisis, says Galt & Taggart, depending how the crisis plays out. Galt & Taggart gives three possible scenarios (optimistic, mild and pessimistic), according to which Georgian economic growth could differ based on the length of the crisis.
The National Bank of Georgia (NBG) has begun relaxing monetary policy and cut the refinancing rate by 0.50 percentage points to 8.5 per cent, announces the NBG. The NBG explains that amid the Covid-19 pandemic and the sharp decline in international oil prices, economic uncertainty in the world remains high.
The World Bank will provide $80 million to Georgia under the Fast Track COVID-19 Facility to mitigate the health and social impacts of the COVID-19 pandemic, announces the World Bank.
Georgia has reported a ninth coronavirus-related death today. A 58-year-old woman with several underlying conditions has passed away from coronavirus infection at First University Clinic in the Georgian capital of Tbilisi earlier today.
What difficulties are companies experiencing?
A decrease in demand is the most significant side effect of Covid-19 for Georgian companies among all sectors, shows the new study of PricewaterhouseCoopers Georgia LLC (PwC Georgia) and the Investors Council.
The real gross domestic product (GDP) will decline in 2020 in Georgia and is estimated to be -4.8 per cent, with projected recovery of growth at 4 per cent in 2021, reads the World Bank’s recent report Global Economic Prospects 2020.
Over half of the enterprises that make up Georgia’s packaging value chain lost more than 50 per cent of their income to lockdown and 83 per cent consider the pandemic a significant threat to their continued operation, says a new study of the European Union and the United Nations Development Programme (UNDP) based on interviews with over 500 companies.
The National Bank of Georgia (NBG) has relaxed the monetary policy and cut the refinancing rate by 0.25 percentage points to 8 per cent, announces the NBG.