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IMF: Georgia’s economic resilience remains strong

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Despite a less supportive external economic environment, the resilience and the fundamentals of the Georgian economy remain strong, the delegation of the International Monetary Fund has said after concluding a working visit to Georgia.

“We welcome the authorities’ continued commitment to prudent macroeconomic policies and structural reforms,” the IMF said in a statement, noting that the National Bank of Georgia (NBG) appropriately raised its policy rate by 50 basis points in September in response to rising inflation expectations and signalled further rate hikes if inflationary pressure increases.

While the IMF mission recognised that the depreciation of Georgia’s national currency, the lari, in recent months impacted Georgian families and businesses, especially those having borrowed in foreign currencies, it believes that exchange rate flexibility allows the economy to adapt to external economic shocks faster.

The IMF has maintained its GDP growth forecast for 2019 at 4.6 per cent. Annual inflation in Georgia is projected at 5.4 per cent in 2019 while it is expected to converge to the three per cent target of the NBG’s monetary policy in 2020.

“With increased downside risks to the outlook, including those arising from global trade tensions, safeguarding foreign exchange reserves now will help mitigate the impact of potential future shocks,” the IMF added.

On September 18, the National Statistics Office of Georgia (Geostat) announced that the Georgian economy had expanded by 4.5 per cent in the first six months this year, compared with the corresponding period of 2018. The highest levels of real GDP growth were registered in the transport, real estate and hospitality industries.

The World Bank expects that the Georgia economy will grow by 4.6 per cent in 2019 and and 4.8 per cent in 2020, with the Asian Development Bank projecting a 4.9 per cent growth rate for this year and 4.6 per cent for 2020.