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The World Bank Forecasts 4% Economic Growth for Georgia

Published: June 14, 2013 | 8:27 am
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Global Economic Prospects-The World Bank’s (WB) flagship report published on June 13 forecasts Georgia’s economic growth to be 4%. The country’s economic growth outlook is 6.3% in 2014 and 6% in 2015.
While mentioning Georgia the report stresses the following aspects:
Monetary policy-interest rate reduction;
Inflation- considerable easing in consumer price inflation since the end of 2012 reflecting weak domestic demand and easing commodity prices with Georgia experiencing deflation since October 2012;
FDI- The recovery in FDI, may be particularly important for countries such as Georgia and Albania, where FDI accounts more than 30 percent of gross domestic capital formation.
Consumer prices- In contrast, consumer prices fell in Azerbaijan and Georgia towards the end of 2012 due to weak domestic demand; decline in food prices; and due to the earlier nominal appreciation of Georgian lari against currencies of its main trading partners. While inflation has picked up in Azerbaijan, Georgia’s deflation continued in April, the sixth month in a row with falling prices, with prices down by 1.7 percent due to the weak economic activity.
Central banks cut their policy rates-Against the backdrop of easing inflation, spare capacity, high unemployment and moderate growth, several central banks in the region including Albania, Azerbaijan, Belarus, and Georgia have cut their policy rates.
Weak Economic Growth- While carry-over from 2012 is generally low in many economies in the region, it is negative for Ukraine and Georgia, and weak for Turkey and Bulgaria.
Agriculture-On the plus side, agricultural production is expected to be better this year in several countries. The summer and winter droughts in 2012 cut the growth rates significantly and generated inflationary pressures in several countries. Countries including Albania, Georgia, Kazakhstan, Romania, Russia, Serbia, and Ukraine will benefit from a higher contribution of agriculture this year.
Earlier, International Financial Institutions and rating agencies delivered the following forecast regarding Georgia’s economic growth: The European Bank of Reconstruction and Development (the EBRD)-3%, Standard & Poor’s rating agency-3.5%, ratings agency Fitch- 3%, International Monetary Fund (IMF)-4%.
In Georgia’s neighboring countries GDP will grow as follows: Russia – 2.3% in 2013, 3.5% in 2014 and 3.9% in 2015, Armenia-5% in 2013, 5% in 2014 and 5 in 2015, Azerbaijan – 4.8% in 2013-2014 and 2.9% in 2015.

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