IMF lowers Georgia’s economic growth forecast for 2021

By Natalia Kochiashvili

Thursday, November 12

IMF says the tourism in Georgia will return to the 2019 level by 2024

Georgia will receive $112 million from the IMF

The International Monetary Fund (IMF) mission has completed negotiations with the Government of Georgia and the National Bank of Georgia (NBG). According to a statement issued by the Foundation, the increase in the number of COVID-19 infections in Georgia and the aggravation of the political situation in the region are factors why 2021 growth in Georgia is expected to be lower than previously predicted. The report released by the IMF on October 13 forecasted 5% economic growth in Georgia in 2021, but after almost a month of monitoring, the IMF revised its estimate to 4.3%.

In addition, the IMF estimates that the crisis in the tourism sector will last more than a year and that the sector will return to 2019 levels only in 2024. According to the NBG, in 2019, Georgia's income from tourism exceeded $ 3 billion, and this year this number is expected to be reduced by 90-95%.

According to the National Tourism Administration, 1.37 million international visitors visited Georgia in the first 9 months of 2020, which is 77.1% less than in the same period of 2019. The flow of visitors from the EU decreased by 83% this year and amounted to 66 thousand. Most of these visitors were in the country before the border was closed and Lockdown was declared earlier this year.

With macroeconomic policy discipline and donor support, reserves will be maintained at an adequate level in the medium term. “It is expected that the tourism shock will last for a long time and the level of tourism revenues will return to the level of 2019 only in 2024.”

According to the same statement, negotiations between the Ministry of Finance and the IMF revised the 2021 budget deficit which has been increased to 7.6%. Until now, the deficit was projected at 5.1%, so increasing it means that the government plans to borrow more than was foreseen in the first draft budget next year.

The 'fiscal rule' states that by 2023, the fiscal deficit should be 3% of GDP and public debt 60%of GDP. Although the IMF statement does not directly state what GDP will reach Georgia in 2021, according to the text, the debt level should be 60% by 2023, there is a high probability that the debt will exceed60% in 2021-2022.

According to Vera Martin Mercedes, the head of the IMF mission, Georgia will receive $112 million after completing the 7th review of its program with the IMF.