Georgia's economy will shrink by 5% instead of 4%
By Natalia Kochiashvili
Thursday, August 6
The updated forecast of the National Bank of Georgia (NBG), in 2020 the Georgian economy will shrink by another 1%. As Koba Gvenetadze, chairman of the NBG announced after the August meeting of the Monetary Policy Committee, the economic decline in Georgia in 2020 will be -5%. The previous forecast was -4%. “The further decline in global economic activity and foreign demand than at the beginning of the pandemic has led to this change,” he explained.
According to Gvenetadze, in the early stages of the coronavirus pandemic, the International Monetary Fund forecast global economic growth at -3%, but recently published updated and more pessimistic forecast reads that the global economy will shrink to -4.9% this year.
According to the NBG President, this is one of the factors that led to the revision of Georgia's forecast.
Based on the baseline scenario of the Central Bank, Gvenetadze also informed that in 2020, revenues from tourism will decrease by 80% compared to last year. According to him, the main feature of the current crisis is uncertainty, which mostly affects the tourism sector.
“We maintain a conservative approach in our forecasts, and therefore our forecast is based on the assumption that tourism revenues will be minimal for the rest of the year,” he added.
According to the NBG’s decision, the interest on more than tens of thousands of loans in Georgia will be reduced. The reduction of the refinancing rate by 0.25 units was discussed by the Monetary Policy Committee. As a result, the monetary policy rate was set at 8 %.
The decision to reduce the refinancing rate was made by the NBG was due to the low inflation rate. In July, prices fell by 0.5 %.
As of July 1, 2020, 118,500 loans tied to the floating interest rate were issued. The vast majority of them are tied to the refinancing rate. At present, ?6185.408 million of loans tied to the floating interest rate have been issued.
According to the public and banks, the number of loans issued from June 1st to July 1st increased by 2,000.
Information on loans tied to the refinancing rate is contained in the loan agreement. Citizens can also get detailed information from the bank.
The next meeting of the Monetary Policy Committee will be held on August 5th, 2020.
