IMF Staff Concludes Visit to Georgia
IMF News, September 15, 2022
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Bibliographic details
- Published: September 15, 2022
Mission summary
- Mission dates: September 8-14, 2022.
- End-of-Mission press release date: September 15, 2022.
- Mission leader: Mr. James John.
- Statement clarifies: “The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.”
Economic outlook and growth
- Growth projection revised up to 9 percent in 2022.
- Drivers of stronger-than-expected performance:
- Faster-than-expected recovery of tourism.
- A surge in inbound money transfers.
- Immigration-related flows.
- Impact on financial sector: “The continued strong recovery has reinforced the soundness of the banking sector.”
- Inflation: “Headline inflation has begun to decelerate, although it remains well above the National Bank of Georgia (NBG) target.”
Risks and uncertainty
- Unusually high uncertainty with notable downside risks including:
- A sharper slowdown in major trading partners.
- Tighter global financial conditions.
- Possible weakening of tourism and other external inflows.
- Sustained high commodity prices.
Fiscal developments and recommendations
- 2022 budget execution: “Appears on track and revenue collection is higher than expected reflecting elevated growth and inflation.”
- Policy guidance:
- Save additional revenue to strengthen fiscal cushions and help contain inflation pressures.
- As work on the 2023 budget proceeds, ensure compliance with the fiscal rule in line with the path envisaged under Georgia’s IMF-supported program.
- Build fiscal and foreign exchange buffers.
Structural reforms and fiscal risk management
- Progress noted on:
- Strengthening state-owned enterprise governance.
- Public investment management.
- Developing a support scheme for renewable power generation.
- Rationale: “Successful implementation of these important reforms would limit fiscal risks and enhance the economy’s resilience over the medium term.”
Monetary policy, exchange rate, and external buffers
- Assessment of National Bank of Georgia (NBG) actions:
- NBG has taken steps to mitigate inflation pressures and support financial stability.
- The mission “welcomes the authorities’ continued commitment to exchange rate flexibility, which has proven an essential shock absorber in recent years.”
- With external flows more favorable than expected, the NBG has been “appropriately” building external buffers by purchasing foreign exchange reserves via standard central bank intervention techniques.
- Policy recommendations for NBG:
- Continue to carefully assess inflation dynamics.
- Be ready to raise interest rates further if there are signs of inflation becoming more broad-based or entrenched.
Engagements and next steps
- Meetings held with:
- Governor of the National Bank Gvenetadze.
- Minister of Finance Khutsishvili.
- Minister of Economy and Sustainable Development Davitashvili.
- Minister of Infrastructure and Regional Development Karseladze.
- Other senior officials, private sector representatives, and the donor community.
- Outlook: The IMF team looks forward to continuing dialogue “in the coming months in the context of the first review of Georgia’s IMF-supported economic reform program.”
Source: IMF press release, September 15, 2022.
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