Georgia in World Bank’s Global Economic Prospects Report

In Georgia, economic activity has been much stronger than what was expected in the aftermath of Russia’s invasion of Ukraine, according to the World Bank’s Global Economic Prospects report released on January 10.  

The World Bank clarified that a recovery in domestic demand, coupled with the rebound of tourism receipts post COVID-19, and a surge in money transfers from Russia has propelled growth, which was expected to reach 10 percent in 2022. The bank, however, predicts that in 2023, growth is expected to slow to 4%, while in the medium term, it is expected to stabilize around 5%.  

The report noted that inflationary pressures in Georgia have eased in the second half of 2022, while remaining high in annual terms. “Inflation is expected to keep declining, albeit slowly, while monetary policy remains tight.”

Noting that risks to this outlook are broadly balanced, the World Bank emphasized that persistent inflation coupled with the tightening of global financial conditions could impact on the Lari, potentially affecting macro-financial stability due to the high levels of dollarization.  

Speaking about the negative prospects of 2023, the World Bank noted that tourism and remittances in Georgia could be negatively affected as Russian economy is expected to suffer a more pronounced slump in 2023, due to a protracted conflict and sanctions.  

“On the upside, money inflows could last longer than initially expected, and Georgia could benefit from some trade diversion as transport corridors are reconfigured,” the report notes.  

The World Bank also notes that global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine.  

According to the World Bank, the global economy is projected to grow by 1.7% in 2023 and 2.7% in 2024. “The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95% of advanced economies and nearly 70% of emerging market and developing economies,” it said.  

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This post is also available in: ქართული (Georgian) Русский (Russian)


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