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Survey: Economists Predict Sharp Slowdown in 2025 Growth Amid Political Instability

According to the latest Economic Climate survey published on January 16 by Policy and Management Consulting Group (PMCG) Research, Georgian economists forecast a significant slowdown in economic growth for 2025. The surveyed economists predicted political instability and exchange rate fluctuations as the most challenging factors affecting Georgia’s economic growth in 2025. Assessment of Georgia’s current economic situation was negative, while predictions for Georgia’s economic situation by the end of the next six months were extremely negative. 

The quarterly survey, conducted in December 2024, reveals that the expected real GDP growth for 2025 stands at 3.6%, marking a 4.9 percentage point decrease from 2024. This projection comes amid what economists describe as their “most pessimistic assessment to date” of Georgia’s economic outlook. Inflation concerns are also mounting, with experts predicting a rate of 4.6% for 2025, representing a 2.7 percentage point increase compared to 2024.

The surveyed economists expect both export and import volumes to decrease in the next six months compared to the corresponding period of 2024. According to the research, this trade outlook comes alongside expectations that the Georgian Lari [GEL] will depreciate against the US Dollar, Euro, and Turkish Lira while appreciating against the Russian Ruble in the same period.

Political Instability and Exchange Rate Concerns

The survey identifies political turmoil as the most significant factor affecting Georgia’s economy in Q4 2024, followed closely by exchange rate fluctuations. Other major concerns include high rates of emigration and labor shortages, particularly the “lack of skilled workers and skills mismatch.”

As PMCG identified, the National Bank of Georgia’s recent currency interventions have sparked debate among economists. During September-October 2024, the NBG reduced its foreign reserve assets by $754 million to stabilize the exchange rate. The survey shows a clear division among experts regarding this decision: 46% believed the intervention was appropriate but excessive in scale, while another 46% argued that “the National Bank of Georgia should not have intervened and should have allowed the economy to find a new equilibrium.”

EU Membership Talks Suspension Impact

The surveyed economists assessed the recently announced suspension of EU membership talks until 2028 as having negative implications for Georgia’s economy. The report indicates that 71% of respondents expect “very negative” effects, while 29% anticipate “negative” impacts.

The suspension is expected to most severely affect:

  • International aid and development assistance (83%)
  • FDI inflows from Western countries (79%)
  • Domestic business environment (58%)

Looking Ahead: 2025 Challenges

For 2025, the survey ranks political instability as the most significant challenge to economic growth, scoring 5.61 out of 7 on the challenge scale. Exchange rate fluctuations (4.54) and weaker domestic demand (4.29) follow as the second and third most pressing concerns. Notably, economists expect domestic factors to have a greater impact than global ones, with regional military conflicts receiving the lowest score of 3.29.

The survey’s findings regarding foreign reserves are particularly noteworthy. As of November 2024, with NBG’s foreign reserves at $4.1 billion, 46% of respondents found these reserves to be “borderline adequate” for domestic shocks, while only 25% considered them “sufficient to withstand regional and global shocks.”

The survey was conducted according to the ifo Institute’s methodology, in December 2024.

Read the full survey here

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