EBRD projects 3.5% growth for 2021 in Georgia in new report

The European Bank for Reconstruction and Development has released its 2020-2021 transition report in which the IFI assesses Georgia’s economic situation amid the pandemic, forecasting 3.5 per cent growth for 2021.

The bank however projects a 5 per cent contraction in GDP for 2020. 

• Georgian economy shrinks 0.7% in September 2020

The Covid-19 pandemic is particularly disruptive for the small and open Georgian economy, says the report.

The impact of the external pandemic shock was wide-ranging, hitting export of goods, tourism and remittances, all very important pillars of the Georgian economy. Strict virus containment measures, imposed in March 2020, hit domestic demand and many small service providers,” the EBRD notes.

The hospitality sector, the main driver of robust economic growth in recent years, has become a key source of vulnerability during the Covid-19 pandemic,” the EBRD says, ascribing much of the dip in GDP due to the collapse of the hospitality sector. 

An increase in government expenditures combined with weaker economic activity led to a sharp rise in the budget deficit, and the loss of tourism revenues has resulted in a widening of the current account deficit, says the institution adding that augmentation of the Extended Fund Facility programme with the IMF secured finances of more than US$ 400 million for 2020-21.

The EBRD says that the economic recovery depends on the rebound of tourism.

The speed of recovery and overall economic health in 2021 will be dictated by the developments in the hospitality sector and the inflow of foreign visitors, both of which are highly uncertain at present,” the report reads. 

The EBRD also says that the government prepared a comprehensive package of measures to support the economy amid the pandemic and it notes that the NBG has strengthened its regulatory power.

In a series of moves in the past year the NBG amended regulations on consumer lending to give more discretionary power to the banks and enhanced its transparency and communication,” says the EBRD. 

What are the key priorities for 2021?

As for key priorities for 2021, the international financial organization says that the authorities should strengthen the resilience of the economy through diversification which is they should support the export of information technologies services and benefit from the expected post-Covid-19 shifts in global supply chains. 

The institution also notes that the governance standards need to remain high on the reform agenda as well as it says that the human capital development through investments in education would help improve the overall productivity of the economy.