Forecast for Growth Rates Predicted for the Second Half of the Year Improved but still Low

Details: Created: 11 November 2014

ISET-PI has updated its forecasts for Georgia’s real GDP growth rates using the September 2014 releases of various economic indicators.
• Based on the data from September, we have made the sixth update of the Q3 forecast. The Q3 growth forecast was revised upward from 2.2% to 4.1%.
• The third forecast for the last quarter of 2014 revised up from 0.4% to 1.1%
• Meanwhile, Geostat has released the official quarterly GDP growth rate for the third quarter of 2014 which is 5.5% (but this data is still preliminary and will be revised in the future).
• From the start of the year, we started to draw some conclusions about the annual growth rate for 2014 (see our January and February publications for a note on the methodology). We have used the forecasts available for each quarter to predict that GDP growth in Georgia in 2014 will be 4.2%. This forecast is quite close to the estimates of EBRD and the World Bank, which are 4% and 5% annually, respectively.

GDP Forecast Methodology

The Georgian Index of Leading Economic Indicators provides current-quarter and one-quarter-ahead GDP forecasts for those who need to make business and policy decisions and cannot wait until the official statistics are announced several months later. According to methodology, our forecast is similar to those conducted by leading research institutes around the world. In particular, ISET-PI adapted the methodology that was originally developed by the New Economic School to forecast GDP for the Russian Federation. We would like to acknowledge the help of Prof. Konstantin Styrin (NES) who agreed to share his MATLAB code with ISET-PI, and the assistance of Dr. Andrei Sarychev in modifying and adapting the code for Georgia‘s needs.