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Record High FDI in 3Q14, Stabilized Lari, Prudent 2015 State Budget

Georgia posted record FDI growth of 99% y/y to US$ 507mn in 3Q14 as its business-friendly environment continued to attract foreign investors. The strong FDI and stable economic framework eased depreciation pressures and the lari has recovered somewhat against the dollar last week, strengthening by 6.2%. While the external environment remains weak, the Georgian economy’s flexibility and lower oil prices mean the outlook for the economy is healthy. The government has taken some prudent decisions: discussions about elimination of the tax-free threshold for personal income tax have been initiated and the 2015 state budget, which contains prudent fiscal parameters, has been approved. The fiscal deficit is planned at 3.0% of GDP, public debt to GDP at 37.2%, current expenditures are almost flat in real terms, and growth-enhancing capital spending increases by 19% y/y. These developments, along with the EU DCFTA (free trade agreement), supportGeorgia’s sustainable economic growth outlook.