IMF Staff Concludes Staff Visit to Georgia

IMF News, February 27, 2019

Source details

An International Monetary Fund (IMF) team, led by Mercedes Vera-Martin, visited Tbilisi during February 20-26, 2019 to discuss recent economic and financial developments and progress with structural reforms.
The mission conveyed preliminary findings; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
The team met with Prime Minister Bakhtadze, President Zurabishvili, Governor of the National Bank Gvenetadze, Minister of Finance Matchavariani, Minister of Economy Kobulia, other senior officials, and representatives of the private sector, civil society, and development partners.

Economic activity grew at 4.7 percent in 2018.
Economic growth is projected at 4.6 percent in 2019.
The current account deficit narrowed to 8 percent of GDP in 2018, from 8.8 percent of GDP in 2017.
The fiscal deficit improved to 2.5 percent of GDP in 2018, as the considerable spending in December only partly offset earlier delays in capital expenditure.
During the last few months, inflation was below the 3-percent target of the National Bank of Georgia (NBG).
With subdued inflation expectations, the NBG decreased its policy rate by 25 basis points on January 30th.
The banking sector remains well capitalized, liquid, and profitable.
Central bank efforts to build external buffers, through foreign exchange purchases and put options, are welcome.

Growth is projected at 4.6 percent in 2019.
Significant infrastructure investment (including from large disbursements that took place at the end of 2018) is expected to compensate for weaker external demand and slower credit growth.
The current account deficit is projected at around 8 percent of GDP, owing to still-robust growth in exports and remittances.
Downside risks to the outlook include:
- weaker trading partner growth,
- global trade tensions,
- a sharper-than-projected credit slowdown.
Risk-management recommendations:
- continued exchange rate flexibility,
- reserve buildup,
- prudent macroeconomic policies.

The team commended the authorities for advancing structural reforms and stressed the need for continued efforts to promote inclusive growth and higher economic resilience to external shocks.
Authorities’ recent and planned measures highlighted by staff:
- measures to limit household indebtedness,
- revision of the fiscal rule,
- progress toward a new insolvency law,
- a more automated VAT refund system,
- a strengthened banking resolution framework.
Recommendations for infrastructure spending:
- scale up infrastructure expenditure while improving project selection and management.
Broader reform priorities to support private-sector-led growth, diversification, job creation, and improved living standards:
- improve education,
- improve the business environment,
- strengthen Georgia’s connectivity and trade integration.

The team expressed gratitude for open and constructive discussions with Georgian authorities and stakeholders.
The IMF team looks forward to continuing the dialogue during the visit for the fourth review of Georgia’s IMF-supported program in April-May.

IMF Communications Department, February 27, 2019 — IMF Staff Concludes Staff Visit to Georgia