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The World Bank (June 2021) estimates that global GDP growth will reach 5.6% year over year (y/y) in 2021. Though thus rebound is uneven, with growth concentrated mainly in advanced economies and developing countries set for a slower recovery. This is driven by unequal access to vaccines, different paces lifting virus containment restrictions, and the scale of fiscal support to the economy. This year the United States and Euro area are projected to expand by 6.8% and 4.2%, respectively, while the Chinese economy is expected to grow by 8.5%. In addition, Georgia’s neighbors are each projected to show moderate growth this year: Armenia (+3.4% y/y), Azerbaijan (+2.8% y/y), Russia (+3.2% y/y), and Turkey (+5% y/y). While a recent World Bank assessment forecasts Georgian annual real GDP growth at 6% y/y in 2021 – up 2 percentage points (pp) compared to January’s projections. At the current pace, most economies will recover to 2019’s GDP per capita level by 2022. However, the emergence of more deadly and resistant variants of the virus create new uncertainties and further risks to global growth.
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The COVID-19 outbreak had a devastating effect on the Georgian economy in 2020. Real GDP contracted by 6.1% according to Geostat’s rapid estimates of economic growth. This was the worst performance of real GDP growth in the country in more than two decades. According to the latest estimates, the economic reality turned out to be far worse than the mid-year projections from NBG, IMF and the World Bank for 2020, which ranged from -4% to -5% y/y. Unemployment increased by 0.9% y/y, while labor force participation decreased by 1.3% y/y in 2020. Hired employees were among those worst affected by the crisis: their number decreased by 5.8% y/y. The unprecedented simultaneous negative demand and supply shocks were at the heart of the economic devastation caused by the virus. Uncertainties related to the pandemic itself and containment measures against it considerably reduced aggregate demand both in Georgia and globally. Domestic and external demand for tourism and related services weakened significantly.
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