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According to Geostat’s figures, in the third quarter (Q3) of 2018, Georgia’s real GDP experienced growth of 4% year over year (YoY). Despite the slowdown of the growth rate compared to the previous quarters, IMF recently revised their forecast of economic growth for Georgia upwardly, from 4.5% to 5.0%. Forecasts for other international organizations and the National Bank of Georgia (NBG) remained the same, while ISET-PI, based on October’s data, expect annual growth in 2018 to be 4.6% YoY.
The weakening of regional economic conditions are the main factors negatively affecting the Georgian economy in Q3. Recent developments in Turkey, caused by the US tariffs imposed on Turkish steel, uncertainty around the Central Bank’s policy and its independency, together with an accelerated fiscal stimulus, negatively affected Georgia via lower revenue from trade, remittances and tourism. According to IMF, the sharp depreciation of the Turkish lira and double-digit inflation will deteriorate the economic performance of country in 2019, and furthermore, create downward spiraling risks for Georgia. The average growth rates for other neighboring countries in Q3 2018 have also reduced markedly - 3.9% YoY in Armenia, 1.5% YoY in Russia, and only 0.6% YoY in Azerbaijan.
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Georgia’s real GDP growth constituted a strong 5.5% year over year (YoY) in the second quarter (Q2) of 2018, according to the Geostat figures. Recently this year, IMF and World Bank upped their forecast of economic growth for Georgia from 4.2% to 4.5%. In August, the National Bank of Georgia (NBG) has also revised its forecast for 2018 from 4.8% to 5.5%. Meanwhile, ISET-PI expects annual growth in 2018 to be 6.3% YoY.
The second quarter’s buoyant mood is fueled in part by high economic growth rates in neighboring countries reflecting positive dynamics in external factors. The Armenia economy advanced 7.2% YoY in Q2 2018, following a 9.6% growth in the previous quarter. Azerbaijan (+1.3% YoY) and Russia (1.9% YoY) benefited from higher oil prices, while FIFA World Cup had an additional positive impact on the latter.
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