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Monetary Fund Narrows Economic Growth Forecast from 5.2% to 3.5% for 2017

International Monetary Fund (IMF) has decreased Georgia’s economic growth forecast for 2017 from 5.2% to 3.5%. IMF updated economic growth indicators for its member countries in the previous week.

According to the updated forecasts, Georgia’s economic growth may record 3.5% in 2017. Under the IMF prognosis, real inflation will exceed the 4% target indicator set by National Bank of Georgia (NBG) because of national currency depreciation in previous years, high commodity prices and growth in excise tax rate. Inflation level will equal to target indicator in 2018. Hardly predictable developments in regional and global economies will make influence on Georgian economy.

According to information of International Monetary Fund, in 2017 global economy rose by 3.5%, economy of developed countries increased by 2%, while economy of developing countries rose by 4.5%.

With 2.7% economic growth pace in 2016, Georgia ranked 98th among world countries, while according to the 2016 prognosis, the country ranks 75th with 3.5% growth pace.

In 2016 the highest economic growth pace was recorded in Nauru (10.4%) and Iraq (10.1%), while the most negative indicators were recorded in Venezuela (-18%) and South Sudan (-13.8%). 3.8% plunge was seen in Azerbaijani economy and 0.2% contraction was seen in Russian economy.

According to IMF forecast, in 2017 the highest economic growth will be recorded in Libya (53.7%), Myanmar (7.5%) and Ethiopia (7.5%). The major contraction will be seen in Venezuela (-7.4%). Russian economy will grow by 1.4% and economy of Ukraine will rise by 2%.

According to IMF information, in 2016 the highest economic growth paces were registered in the following countries:

  1. Nauru – 10.4%;
  2. Iraq – 10.1%;
  3. Ethiopia – 8.0%
  4. Uzbekistan – 7.8%;
  5. Côte d’Ivoire – 7.5%;
  6. Iceland- 7.2%;
  7. Cambodia – 7.0%;
  8. Laos – 6.9%;
  9. Bangladesh – 6.9%;
  10. Tajikistan – 6.9%;

It should be noted that International Monetary Fund (IMF) frequently corrects economic growth forecasts and sometimes, this institution  makes erroneous forecasts too. For example, in 2016 Georgian economy was to grow by 3.4%, according to IMF prognosis, while according to the report by Geostat, national statistics service of Georgia, our economic growth marked 2.7%.

In 2017 Georgian government forecasts 4% economic growth. It should be noted that Georgian Government also makes mistakes in forecasts, like IMF.  Over the past 3 years, Georgian economy has showed lower indicators compared to the initial plans. According to Geostat information, GDP real growth pace in February 2017 made up 4.4% year on year, while January-February averaged real growth marked 4.8%. In January, GDP upturn constituted 5.2%. The fact is that January-February 2017 recorded pleasant tendencies for the Government and this tendency suggests that economic growth could reach 4% at the end of 2017.

Thus, we should wait to see which forecast will justify. Georgian Government forecasts 4% upturn in 2017, while International Monetary Fund predicts a little bit pessimistic 3.5% upturn.