Banking
Posted: 2 weeks ago

Economic Growth Potential

According to a preliminary forecast by TBC Bank, 2019 economic growth will be about 4.7%. Growth is expected to exceed 5% in 2020, TBC Bank’s chief economist Otar Nadaraia told BusinessPartner.

Economic growth remains within the planned parameters. External factors that have negatively affected economic growth in 2018 have improved in 2019, he said. The third quarter of 2019 was very successful, and on the whole, this year the economy will grow by 4.7%.

As for 2020, a slowdown will emerge in January-June 2020, compared to the same period of 2019. However, the situation will be improved in the second half of 2020, and growth will exceed 5%, he added.

“2019 economic growth is expected to be about 4.7%, or a little higher. As for the year of 2020, according to the basic scenario, the indicator is expected to decline year on year. The first and second quarters of 2020 will be comparatively lower, because of the Russian flight ban and the slowing major infrastructure projects. Economic growth will accelerate in the second half of 2020, and the figure will get closer to a long-term growth rate. We expect at least a 5% upturn, or we may have a scenario where we have a higher base”, Nadaraia noted. This year, loan growth is lower year on year, and in 2020 this rate will be maintained or decline, he said. At the same time, external factors, which have an essential impact on economic growth, will improve in all directions in 2020.

The tourism sector will show more stability to lower tourist inflows from Russia and FDI slowdown will also be alleviated compared to 2019, he said. TBC Bank’s chief economist supposes that the next year is an election year and certain pessimism may emerge in the mood of consumers.

As for inflation, Nadaraia suggests that in order to maintain the target inflation rate, the National Bank of Georgia (NBG) will have to tighten the monetary policy rate again, especially in the event that political stability declines in the country. “This year the inflation rate is expected to be at 7-8%. The key objective is that in 2020, the inflation rate should return to the targeted number, and even go below. The current exchange rate makes this less possible. Therefore, it is necessary to strengthen the GEL’s exchange rate. If the political factors and consumer and business climate worsens, we expect the monetary policy rate to rise further”, Otar Nadaraia told BusinessPartner.