The Georgian economy’s growth rate appeared to slow down in September. According to Gaostat’s rapid estimates forecast, real growth of GDP decreased to 4.1%. This estimate is the lowest this year since April, when the growth rate fell to 2.7%. The ISET Leading Economic Indicators index warned about a possible slowdown of the economy in the third quarter, citing, in particular, the significant decline in exports that began in August 2014. The ISET forecast of GDP growth in the fourth quarter is 1.1%. The weaknesses of the economy seem to stem from two main sources: weak internal demand (lower consumer confidence in September affecting domestic consumption) and a slowdown in external demand (negative export growth).

External demand – export declines

Starting from the second half of the year, exports have been increasing slowly, but then plunged in August and September by 13% and 7% respectively, as compared to the same months of the previous year.

Georgian exports were significantly impaired by the regulatory import restrictions undertaken in neighboring Azerbaijan. The restrictions set by Azerbaijan’s government came into full effect in August, and effectively decimated the car re-export business in Georgia. Reduction in car re-exports seems to be one of the most important items driving the decline of exports. More precisely, it contributed around 5.5 percentage points to the total 7 percent decline in September. Download the full report