World Bank estimates a 6% reduction in the Georgian economy
By Natalia Kochiashvili
Friday, October 9
The World Bank has updated its economic forecasts for Europe and Central Asia. According to the new assessment, the bank predicts a 6% reduction in the Georgian economy in 2020. However, due to unemployment caused by the COVID-19 crisis, the World Bank estimates that 160,000 citizens could find themselves in poverty this year.
According to the statement, Georgia's economy has slowed sharply due to fiscal support, steady credit growth, and remittances. Nevertheless, the economy is expected to shrink by 6% by 2020, reflecting severe mobility restrictions at the beginning of the pandemic, job cuts, and international tourism.
“Restrictions, which accounted for 8% of Georgia's gross domestic product before the pandemic, will also have a severe social impact, with some 160,000 Georgians living in poverty and 400,000 reduced in income by 2020,” says the assessment, expecting absolute poverty growth in Georgia as a result of grown unemployment caused by the pandemic.
As for the economic growth forecast, the World Bank expects it to reach 4% by 2021, when pandemic shocks pass and tourism will begin to recover as consumer and business self-confidence increases.
The World Bank regional director in the South Caucasus, Sebastian Molineus, reaffirmed the bank's readiness to participate in the process of post-pandemic recovery of the Georgian economy. According to him, Georgia's efforts to tackle the economic and social consequences of the COVID-19 crisis have been sustained and made possible by prudent management of the economy before the pandemic, ‘although much remains to be done in responding to the expected increase in poverty.’
The World Bank was involved in the Georgian government's response to COVID-19 in terms of supporting health and social care. And now, with planned assistance to the private sector and targeted budget support, Molineus assures banks will participate in the recovery process.
“The main message of the World Bank economic report is that the region of Europe and Central Asia is facing the worst recession since the financial crisis of 2007 and 2008. We forecast that the economic downturn in the countries of the region will be 4.4 %,” he said. Molenius expects the economy to recover next year "most likely in the range of 1.1 - 3.3 %, even though the outlook is very uncertain, leaning towards the negative."
He praised the sound macroeconomic policy pursued by the Government of Georgia is noteworthy, which has made it possible to support families and firms, to make significant investments in the healthcare sector and social programs, creating "a certain buffer to partially alleviate the shock."
The Prime Minister commented on the mentioned forecast, highlighting the tone of possibility in the assessment, rather than the tone of assurance. He noted that if the elementary rules are followed with high discipline, the Georgian economy will recover faster.
As for the possibility that the World Bank predicts that 160,000 Georgians may find themselves in poverty. The Prime Minister, however, claims that the government has a sensible plan.
“We offered one of the largest social packages in Eastern Europe to our citizens - those who lost their jobs, those who were self-employed, the tourism sector, etc. As soon as we assess the second wave, by the end of the year, we will take care of the need to offer additional social assistance,” announced Gakharia, adding that in recent years, a large part of the citizens of Georgia have been lifted out of extreme poverty, but the pandemic has changed these data. Gakharia promised that his team will do their best to return to early 2019 figures, which was one of the best years for Georgia.
