International Monetary Fund (IMF) mission, led by Mercedes Vera-Martin paid a visit to Georgia on February 5-11, National Bank of Georgia (NBG) informs. The purpose of the mission was to assess the progress of processes and structural reforms in the country's economy and financial sector.
IMF mission concludes visit to Georgia
By Natalia Kochiashvili
Friday, February 14
By the end of the visit, Vera-Martin made a statement. According to preliminary estimates, economic growth in 2019 was 5.2 percent, which exceeds the fund's 4.6 percent forecast, and the current account deficit in 2019 dropped to a record low - 4.4 percent of GDP.
IMF mission head said that despite high local demand imports have not increased, whereas exports rose 12% compared to the previous year. According to her, the lending rate growth was maintained despite the tightening of monetary policy; Vera-Martin named decline in foreign currency reserve requirements for banks as one of the reasons.
“Revenue growth has made it possible to increase government investment to a record high (up to 8 % of GDP) without increasing the fiscal deficit from 2.1 % of GDP.” – she said. The head of the mission also emphasized that inflation was 7 % at the end of 2019, then slumped to 6.4 % in January compared to the previous year.
According to her, the prospect of Economic growth for 2020 is stable and the forecast is 4.3 %. She explained that the risks are balanced due to activity in 2019 that was higher than expected. Vera-Martin emphasized that due to tighter monetary policies as well as one-off factors, Georgia will get closed the annual target inflation (3%) by 2020.
Head of the IMF mission said that an uncertain international perspective requires maintaining exchange rate flexibility, accumulating reserves and pursuing prudent macro policies.
In name of the IMF, she welcomed the intention of the Georgian authorities to maintain a tight monetary policy as long as necessary and to implement a responsible fiscal policy.
IMF team also greeted the government's efforts to accelerate VAT remuneration by introducing an automatic remuneration system; as well as the steps are taken to create public-private cooperation framework and improve the management of the state-owned enterprises in order to avoid the accumulation of fiscal risks.
Vera-Martin emphasized the importance of continuing structural reforms to increase resilience to external shocks and to achieve more inclusive economic growth in the medium term. The mission endorsed the launch of a new resolution framework for banks and steps towards insolvency law.
“The current situation allows for further reforms, including the introduction of indexing rules for basic pensions, meeting the needs of investing in infrastructure and improving education that will support private sector activities and create jobs,” said IMF mission chief.
IMF Mission expects to continue the discussion with the government in terms of the program’s sixth review in April.