## PR 20/202 ## Source details **Canonical URL:** [PR 20/202](https://www.imf.org/-/media/files/news/press-release/2020/pr20202-geo-georgia.pdf) ## Other formats - [Markdown version](/-/media/files/news/press-release/2020/pr20202-geo-georgia.pdf.md) - [Structured JSON version](/-/media/files/news/press-release/2020/pr20202-geo-georgia.pdf.json) --- ### Approval and emergency financing - The IMF Executive Board completed the sixth review of Georgia’s three-year program under the Extended Fund Facility. - The Board approved an increase in the country’s access by 130 percent, bringing Georgia’s total access to SDR 484 million (quota 230 percent). - Upon completion of this review, SDR 147 million (approximately $200 million) is made available to Georgia as budgetary support to address immediate fiscal and balance of payments needs related to the COVID-19 pandemic, including financing higher health and social spending. - After this disbursement, Georgia’s total IMF disbursements will equal SDR 327 million (approximately $448 million). - The Board also approved the authorities’ request to waive non-observance of the fiscal deficit criterion under the program. ### Economic impact and authorities’ response - The pandemic is expected to leave a significant imprint on Georgia’s economy, interrupting positive growth trends of previous years. - Weakened macroeconomic conditions and fiscal strain have created immediate balance of payments and budget financing needs. - Authorities took steps to preserve macroeconomic stability by increasing spending on health and social assistance and providing targeted support to households and the most affected sectors and businesses. - The IMF financing will contribute importantly to financing the rise in health and social spending. ### IMF assessment and policy recommendations (remarks by Tao Zhang, Deputy Managing Director and Chair) - COVID-19 inflicted a severe shock on the Georgian economy: reduced external demand and tourism led to a deterioration in the balance of payments, depreciation of the lari, and a sharp decline in economic activity. - Authorities acted swiftly with containment measures and targeted support to households and hardest-hit sectors. - The fiscal deficit has increased. Mobilizing external financing allows for financing additional spending. While increased budgetary spending is necessary, attention should be paid to debt sustainability and fiscal risks emanating from state-owned enterprises. - The National Bank of Georgia has appropriately maintained a moderately tight monetary policy while preserving exchange rate flexibility. Monetary policy decisions should be based on close monitoring of inflation expectations. - Continued structural reforms would help preserve medium-term growth potential and support a swift recovery after the pandemic. Specific reforms noted: adopting a rule for pension indexation to preserve real incomes of pensioners; completing the bank resolution framework and operationalizing the insolvency framework to help repair the balance sheet of the economy. - Increasing program access will help the authorities implement COVID-19 shock-mitigating measures and meet immediate balance of payments needs. ### Selected economic and financial indicators, 2018–21 (as reported) - Real GDP (annual change, percent): 4.8 4.6 5.1 4.3 -4.0 4.0 - Output gap (difference between actual and potential GDP): -1.5 -1.0 -0.5 -1.0 -1.5 -1.7 - Nominal GDP (billion Lari): 44.6 49.0 50.0 53.4 50.3 54.5 - Nominal GDP (billion US dollars): 17.6 17.5 17.7 18.7 15.1 17.7 - GDP per capita (thousand US dollars): 4.7 4.7 4.8 5.1 4.1 4.8 - GDP deflator, period average: 4.3 4.9 6.4 4.7 5.1 4.0 - CPI inflation, period average: 2.6 4.9 4.9 4.5 4.7 3.6 - CPI inflation, end of period: 1.5 7.2 7.0 3.0 3.5 3.0 - Core inflation, end of period: 0.5 ... 3.8 ... ... ... - Gross national saving (percent of GDP): 26.5 26.2 28.7 26.2 20.3 25.5 - Investment (percent of GDP): 33.3 31.2 33.8 31.1 31.6 33.0 - of which public: 6.4 7.2 7.9 6.6 6.4 6.4 - of which private: 26.9 24.0 25.9 24.4 25.2 26.6 - Consolidated budget (percent of GDP) - Revenue and grants: 26.4 26.4 26.7 25.4 24.1 24.7 - Tax revenue: 23.4 23.5 23.7 23.0 21.4 22.2 - Expenditure: 29.2 28.8 29.1 28.3 32.9 29.9 - Current expenditure: 21.3 21.3 21.0 21.4 26.2 23.2 - Capital expenditure and loans by the budget: 7.9 7.6 8.1 6.9 6.7 6.8 - Net lending/borrowing (GFSM 2001): -0.8 -1.8 -1.8 -2.2 -8.2 -4.4 - Modified net lending/borrowing (deficit, IMF program definition): -2.3 -2.1 -2.0 -2.5 -8.5 -4.8 - Public debt (percent of GDP): 41.3 44.1 42.7 44.5 62.8 59.6 - Public debt in foreign currency: 32.5 34.3 32.9 33.7 50.6 45.6 - Public debt excluding government deposits: 38.8 40.9 39.8 40.9 54.0 51.2 - Financial sector and credit - Credit to private sector (annual percent change): 19.3 17.3 19.9 8.5 5.9 3.6 - With fixed exchange rate: 17.0 11.5 15.2 7.5 -2.3 8.2 - Broad money (annual percent change): 14.0 14.7 16.1 9.2 3.6 11.5 - Broad money, FX deposits (annual percent change): 13.3 14.9 16.0 8.1 3.1 8.3 - With fixed exchange rate: 11.9 9.2 11.8 8.1 -4.6 16.7 - Deposit dollarization (percent share): 62.1 62.9 61.9 62.7 62.4 58.4 - Loan dollarization (percent share): 55.8 53.7 54.4 51.3 51.6 49.2 - Credit-to-GDP ratio: 58.8 62.8 62.9 62.5 66.2 63.3 - External sector - Current account deficit (billion US dollars): -1.2 -0.9 -0.9 -0.9 -1.7 -1.3 - Current account deficit (percent of GDP): -6.8 -5.0 -5.1 -4.9 -11.3 -7.5 - Trade balance: -23.4 -20.9 -21.0 -20.5 -20.4 -19.8 - Terms of trade (export-import price ratio, percent change): -5.1 0.2 2.6 -1.8 1.8 3.9 - Gross international reserves (billion US dollars): 3.3 3.3 3.5 3.4 3.5 3.6 - IMF composite (floating) coverage ratio: 95.4 96.4 99.0 95.9 103.9 98.5 - Total external debt (percent of GDP): 100.3 109.3 103.4 108.1 136.3 124.1 - Total external debt excluding inter-company lending: 82.2 87.7 85.0 86.7 111.4 102.2 - Exchange rates and competitiveness - GEL/USD exchange rate (period average): 2.53 ... 2.82 ... ... ... - GEL/EUR exchange rate (period average): 2.99 ... 3.15 ... ... ... - REER (period average, 2010=100): 104.1 ... 98.1 ... ... ... *Source: PR 20/202, International Monetary Fund.* --- _Source: https://www.imf.org/-/media/files/news/press-release/2020/pr20202-geo-georgia.pdf_