The World Bank’s “Global Economic Prospects” report for June emphasizes Georgia’s present economic prospects within the overview of the regional and global economy.
The report reveals that Georgia’s economic activity has remained robust, with a year-on-year growth of 7.3% in the first four months of 2023. The growth has primarily been driven by the services sector, although there has been a decline in manufacturing activity.
However, the World Bank expects Georgia’s growth rate to slow to 4.4% in 2023 due to an expected slowdown among trading partners. Nevertheless, the country’s economy is projected to stabilize at around 5% in the medium term.
A contributing factor to Georgia’s favorable economic situation is the decline in inflation. Lower international commodity prices and the appreciation of the national currency, the Lari, have led to a significant decrease in inflation. In May, annual inflation reached 1.5%, remaining below the National Bank of Georgia’s 3% target. The report suggests that inflation is likely to remain low due to tight monetary policy, despite potential pressures on the demand side.
The report also discusses potential risks to Georgia’s economic outlook. While uncertainties persist, the risks are considered balanced. On the downside, a reversal of money transfer inflows and tighter global financial conditions could impact the value of the Lari, potentially affecting macro-financial stability due to high levels of dollarization. Conversely, there is the possibility that money inflows might last longer than anticipated, and Georgia could benefit from trade diversion as transport corridors are reconfigured.
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