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Economic Growth Pace Declines – GDP Growth Shrank by 3.8% in July

According to preliminary estimations, in July 2017, as compared to the same period of 2016, real GDP growth pace made up 3.8%, while in January-July 2017 the averaged real growth constituted 4.4%. It should be noted that this year the Government expects economic growth to mark 4%.

«Starting January 2012 Geostat has been conducting preliminary economic growth estimations on monthly basis, based on  departmental statistics (turnover of VAT payer enterprises, fiscal and monetary indicators). The mentioned estimations represent an internationally recognized practice for estimating short-term preliminary operative statistics.

In the fields, where monthly indicators are not prepared (for example, agriculture sector, unobserved economic volume), estimations are based on indicators of the previous period.

Consequently, real quarter estimations may differ from early estimations. Moreover, turnover of VAT payer companies of previous months may be revised. As a result, indicators of monthly early estimations of real growth are also corrected», the Geostat information reads (see the chart).

The January-July period has registered an upturn in almost all components of economic growth indicator. In the reporting period, exports constituted 1 446.7mln USD, up 28% year on year. According to Geostat indicators, imports marked 4 228.6mln USD, up 8.5% of the same period of 2016. In the reporting period, external trade constituted 5 675.2mln USD, up 13% year on year.

The month of July also registered a growth in number of registered companies.  A total of 3 890 ones new companies were registered in the period, up 7.1% year on year. When preparing preliminary estimation of economic growth, turnover of VAT payer companies made up 5.508bln GEL, up 13.8% year on year.

It is paradox that from April through July the banking sector’s total output has been growing, while economic growth pace is declining starting May.

It should be noted that according to IMF forecasts, Georgia’s economy will grow by 3.5% in 2017. However, at the end of 2016, IMF forecast for 2017 constituted 5.2%, but the forecast was lowered to 3.5% at the beginning of 2017. According to the IMF forecast, per capita income in 2017 will rise to 10 645 USD. According to the IMF indicators, in 2016 with 2.7% economic growth pace Georgia was 98th worldwide in 2016, while the country ranks 75th according to the 2017 forecast (3.5%).

If Georgia aims to become a developed country, it is necessary that our growth pace exceed the one of developed countries twice and more to come up with them. However, economic growth pace over the past 2 years grows the interval between our  country and the developed world more and more and we are losing event the existing status-quo. The beginning of this year recorded promising tendencies, because in the mentioned period the economic growth exceeded planned 4%, however, over the past months GDP growth pace declined.

Today Georgia loses to European countries 7-8 times  in terms of GDP indicators per capita. EU economy grows by 2% on annual basis on average and our economy needs annual 7-8% upturn to come up with EU countries. Even 5% upturn will make Georgian economy twice smaller compared to EU averaged economy by 2050. And we need at least 7% growth to come up with EU in 50 years. Averaged annual 7% growth will allow the country to equal to European living level in 40 years, while 10% growth will shrink the period to 25 years.

 

By Merab Janiashvili
Economic Analyst
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