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Georgia’s GDP declined by 6.2% in 2020

By Natalia Kochiashvili
Tuesday, March 23
The National Statistics Office of Georgia (Geostat) published the preliminary data, according to which the nominal gross domestic product (GDP) amounted to GEL49.40 billion in 2020, up by 0.3% year-on-year, while the real growth of GDP reduced by 6.2%. A new Geostat estimate shows a higher economic downturn than the preliminary report, which showed last year’s economic decline of 6.1%. Note that in January 2021, the economic decline was 11.5%.

The Georgian economy has not experienced such a sharp decline since 1994, including after the August 2008 war. The main reasons for this decline were the economic shock of Covid-19 and the lockdowns in the country.

The Geostat also reported that real GDP in the fourth quarter of 2020 contracted by 6.8%, while nominal GDP stood at GEL13.9 billion ($ 4.3 billion).

The largest shares of GDP by activity were held by: Wholesale and retail trade; repair of motor vehicles and motorcycles (14.5%), Real estate activities (11.7%), Manufacturing (10.8%), Construction (8.9%), Agriculture, forestry and fishing (8.4%), Public administration and defence; compulsory social security (7.4%), Transportation and storage (5.9%), Financial and insurance activities (4.9%).

Real growth was registered in: Human health and social work activities (7.9%), Agriculture, forestry and fishing (3.6%), Education (3.1%), Public administration and defence; compulsory social security (1.8%), Other service activities (7.1%).

A decrease in the real value-added was recorded in: Accommodation and food service activities (-37.9%), Transportation and storage (-22.3%), Wholesale and retail trade; repair of motor vehicles and motorcycles (-5.6%), Arts, entertainment and recreation (-18.9%), Administrative and support service activities (-37.9%), Professional, scientific and technical activities (-18.4%), Construction (-4.7%), Financial and insurance activities (-5%).

The economic situation is no better this year either. Yesterday, the National Bank of Georgia (NBG) sold $ 40 million at a foreign exchange auction - this decision was made by the NBG after the value of one dollar in the trading system exceeded GEL3.3368. According to the Central Bank, the exchange rate at the foreign exchange auction was 3.3293. This was the fourth currency auction in 2021. This year, the NBG sold a total of $ 160 million.

The increase in the lari exchange rate yesterday was most likely due to the depreciation of the Turkish lira, which has reached 15% in the last 24 hours. As a result, the value of one dollar became 7.94 Liras. For its part, the drop in the turkish national currency exchange rate is linked to the release of central bank chairman Naji Agbal by President Recep Tayyip Erdogan's.

Last Thursday, Turkey's central bank raised its refinancing rate from 17% to 19% against Erdogan's will, in a way the bank planned to contain rising inflation in the country. Erdogan is demanding a reduction in refinancing rates despite high inflation, which the central bank opposes, prompting the bank’s president to step down.