IMF Hails Georgia’s Economy

Georgia’s economic performance continued to be impressive despite the external shock associated with Russia’s economic embargo, IMF officials said on June 1.

An IMF mission, led by John Wakeman-Linn, visited Georgia to review recent economic developments and hold discussions for the sixth and final review under the IMF’s Poverty Reduction and Growth Facility (PRGF) on May 24-June 1.

It is estimated that the economy grew by 9.4% last year and it is projected to grow by 10% or more in 2007, the IMF mission said.

End-period inflation for 2006 was 8.8% and as of end-May 2007, twelve-month inflation was about 7.3%.

“The decline in inflationary pressure since mid-2006 confirms the authorities’ commitment to keeping inflation in single digits,” the mission said.
 
To keep inflation in single digits, the mission stressed the need for careful management of domestic demand and urged the Georgian authorities “to aim for a reduced fiscal stimulus by implementing a tighter fiscal stance in 2007.”

Georgia’s current account deficit “increased substantially” in 2006 and is projected to increase further to 20% of GDP in 2007, which reflects the rapid growth of imports.

The IMF mission has also noted that the commercial banking sector remains strong, but warned that the rapid expansion in bank lending requires “careful monitoring.”

In this context, the IMF stressed that there was a need for the central bank to further strengthen its supervision of commercial banks.

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