Government raises 2021 economic growth forecast to 6.5%

By Natalia Kochiashvili

Tuesday, June 1

“April's economic growth is the result of the right policy of the government, there are very positive attitudes and expectations in business,” PM said.

The updated forecast will improve the current account deficit and the dynamics of government debt reduction will be faster.

The National Statistics Office of Georgia (Geostat) published the preliminary estimates for economic growth in April 2021. According to the report, compared to the same period of the previous year, real GDP growth was 44.8%, while the average for the first 4 months of 2021 is 8.1%. Record high economic growth is mainly due to the so-called 'base effect' caused by the reduced economy last year - due to the lockdown in the country in April 2020 it shrank by 16.6%.

Geostat data shows that in April 2021, compared to the same period of the previous year, growth was observed in the following sectors: manufacturing, construction, trade, transport and warehousing, hotels and restaurants, financial and insurance activities, real estate activities, professional, scientific and technical activities. A declining trend was observed in the mining industry.

According to Geostat, the turnover of VAT refineries in April amounted to ?8.44 billion, which is 93% higher than the same period in 2020, which is also due to the 'baseline effect.' Exports, which have grown by 19.6% this year, have had a positive impact on the economy as well.

Executive Director of Geostat emphasized that compared to the previous year, there was an upward trend in all respects - “There was growth in construction, metallurgy was activated, the production of construction materials and cement has increased, the output of the financial and insurance sectors also increased (51%), trade became more active, Auto imports have grew by 86% compared to the previous year, and re-exports have increased 6 times, which also makes a positive contribution," said Gogita Todradze.

Prime Minister Irakli Gharibashvili responded to the Geostat economic growth rate saying that the average growth in January-April is higher than the rate of decline of the Georgian economy in April last year, which is understandable.

During the government session, it was decided to update the 2021 budget. According to the Minister of Finance Lasha Khutsishvili, the reason for the budget adjustment is the above-mentioned faster recovery rate of the economy. Adjustments due to this factor will be included in the macroeconomic forecasts of the budget and instead of 4.5% the target for 2021 is set at 6.5%. According to the Minister of Finance, due to the relatively high growth of the economy, the budget deficit will be adjusted, which will be reduced to 7.1%. The previous forecast was 7.6%. Khutsishvili also said that in an optimistic scenario, economic growth in 2021 is projected at 10.2%. He underscored that the 44.8% growth in April exceeds not only the 2020 rate but also the size of the 2019 economy. The minister stated that the 44.8% growth in April exceeds not only the 2020 rate but also the size of the 2019 economy. The Minister also reiterated that with the exception of the 'base effect', the size of the Georgian economy has increased by 21% compared to April 2019 this year.

"The updated figures are much more positive, namely exports increased by 70% in April, remittances increased by 144%, and the dynamics of budget revenues are very convincing. We expect a rapid recovery of tourism and the opening of land borders from tomorrow, which will be an incentive for economic recovery. The role of political stability must be mentioned as well," PM explained.