{
  "title": "IMF Executive Board Concludes 2018 Article IV Consultation with Georgia",
  "publication": "IMF News, June 28, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/06/28/pr18266-imf-executive-board-concludes-2018-article-iv-consultation-with-georgia",
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  "summary": "On June 27, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Georgia.",
  "publishDate": "2018-06-28",
  "sections": [
    {
      "heading": "Overview",
      "content": "- On June 27, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Georgia.\n- Since the global financial crisis, macroeconomic performance in Georgia has been positive: growth exceeded most peers, policy frameworks were strengthened with inflation well-anchored, fiscal deficits were broadly well-managed, the banking sector remained stable despite a large exchange rate depreciation, and foreign reserves increased."
    },
    {
      "heading": "Recent macroeconomic performance (2017 and early 2018)",
      "content": "- Real GDP growth: 5 percent in 2107. (Text states \"real GDP grew 5 percent in 2107.\")\n- Annual inflation: 6.7 percent at end-2017; fell to 2.5 percent in April 2018 as one-off shocks (increase in excises) dissipated.\n- Fiscal position in 2017: remained stable while allowing a considerable ramp up in public investment, supported by revenue measures, strengthened recovery, and reduction in current spending.\n- External accounts in 2017:\n  - Current account deficit narrowed to 8.7 percent of GDP.\n  - FDI reached 10.5 percent of GDP.\n  - External debt (mostly concessional), excluding intercompany loans, was 96 percent of GDP in 2017.\n- Drivers of growth: external demand, buoyant consumption, rapid growth in exports, tourism, and remittances."
    },
    {
      "heading": "Near-term outlook and risks",
      "content": "- Near-term outlook: improved moderately; the output gap is expected to close gradually in 2019–20.\n- Medium- to long-term: growth expected to accelerate moderately and external vulnerabilities to decrease due to dividends from structural reforms.\n- Risks (characterization: balanced):\n  - Upside: stronger domestic and external demand; larger-than-anticipated impact from structural reforms could increase growth in outer years.\n  - Downside: vulnerability to regional developments and market volatility in main trading partners; weaker growth in key advanced economies and retreat from cross-border integration could undermine export diversification efforts.\n- Policy implication: stronger demand in the presence of structural bottlenecks could result in demand pressures and require policy tightening."
    },
    {
      "heading": "Policy recommendations and authorities' commitments",
      "content": "- Fiscal:\n  - Authorities committed to fiscal sustainability.\n  - In context of limited room to raise extra revenue, fiscal sustainability will be achieved by containing current spending while creating room for higher public investments.\n  - In the medium run, spending to implement education reform will be ramped up and compensated by lower capital spending.\n  - Steps taken to extend coverage and reporting of fiscal risk and to address issues with the VAT refund system.\n  - Continue improving revenue administration, refund VAT credits, and narrow the fiscal deficit.\n  - Revamp fiscal rule framework to improve fiscal governance and accountability.\n- Monetary and financial:\n  - Continue improving monetary and financial frameworks by strengthening the crisis management system, supporting development of capital markets, and providing incentives to de-dollarize.\n  - Monetary policy focus: price stability supported by exchange rate flexibility and interventions to smooth excessive volatility and build reserves.\n  - Strengthen inflation-targeting framework via improved liquidity management and communication.\n  - Strengthen crisis management procedures, including implementing emergency liquidity assistance and banking resolution frameworks.\n  - Contain credit to households by tightening prudential financial policies in light of indebtedness concerns.\n- Structural reforms:\n  - Authorities committed to ambitious structural reforms to promote private sector-led activity through improvement of business environment, economic diversification, and job creation.\n  - Prioritize growth-enhancing measures: improve infrastructure, education, labor market policies, and competitiveness.\n  - Mobilize foreign direct investment in export-oriented sectors."
    },
    {
      "heading": "Executive Board Assessment",
      "content": "- Directors agreed with the thrust of the staff appraisal.\n- Commendations:\n  - Strong economic performance under the EFF program, supported by favorable external conditions and prudent economic policies.\n  - Strengthened confidence and improved growth.\n- Observations and recommendations:\n  - Outlook generally positive; risks balanced but Georgia remains vulnerable to external shocks and market volatility.\n  - Continued commitment to sound policies and structural reforms necessary to preserve gains, address vulnerabilities, and foster stronger and more inclusive growth.\n  - Support for prudent fiscal policies, rein in current spending, improve revenue administration, refund VAT credits, and narrow fiscal deficit.\n  - Welcomed progress in coverage and reporting of fiscal risks; noted risks remain high, mainly from state-owned enterprises and power purchase agreements—encouraged further transparency and monitoring.\n  - Monetary policy: appropriate focus on price stability; supported exchange rate flexibility and targeted interventions.\n  - Encouraged strengthening inflation targeting through liquidity management and communication.\n  - Commended central bank for strengthening financial supervision and regulatory framework, including implementing FSAP recommendations.\n  - Supported measures to contain household credit and welcomed gradual de-dollarization as a sign of increased credibility in monetary policy.\n  - Noted need to align crisis management framework with international best practices and improve crisis management procedures."
    },
    {
      "heading": "Selected economic and financial indicators (2015–19) — key figures preserved exactly as presented",
      "content": "- Real GDP (annual percentage change):\n  - 2015: 2.9\n  - 2016: 2.8\n  - 2017: 4.3\n  - 2018 (CR 17/361 Prel. Projections): 5.0\n  - 2019: 4.2 and 4.8 (table lists two 2019 values under different columns)\n- Nominal GDP (in billion of laris):\n  - 2015: 31.8\n  - 2016: 34.0\n  - 2017: 37.3\n  - 2018: 38.0\n  - 2019: 40.1, 41.4, 44.8 (table lists multiple year/column entries)\n- Nominal GDP (in billion of U.S. dollars):\n  - 2015: 14.0\n  - 2016: 14.4\n  - 2017: 15.0\n  - 2018: 15.2\n  - 2019: 16.3, 16.9, 18.3\n- GDP per capita (in thousand of U.S. dollars):\n  - 2015: 3.8\n  - 2016: 3.9\n  - 2017: 4.1\n  - 2018: 4.4\n  - 2019: 4.5, 4.9\n- CPI, End-of-period:\n  - 2015: 1.8\n  - 2016: 5.6\n  - 2017: 6.7\n  - 2018: 3.2\n  - 2019: 2.7, 3.0\n- Gross national saving (in percent of GDP):\n  - 2015: 19.5\n  - 2016: 19.9\n  - 2017: 20.6\n  - 2018: 23.2\n  - 2019: 22.5, 25.5, 26.0\n- Investment (in percent of GDP):\n  - 2015: 31.5\n  - 2016: 32.7\n  - 2017: 31.0\n  - 2018: 31.9\n  - 2019: 33.1, 34.7, 35.2\n  - Public investment (percent of GDP): 2015: 6.1; 2016: 6.8; 2017: 7.4; 2018: 8.1; 2019: 7.9\n  - Private investment (percent of GDP): 2015: 25.9; 2016: 27.7; 2017: 25.2; 2018: 25.8; 2019: 26.6, 27.9\n- Consolidated government operations:\n  - Revenue and grants (percent of GDP): 2015: 28.1; 2016: 28.3; 2017: 28.9; 2018: 29.0; 2019: 28.6, 27.3\n  - o.w. Tax revenue (percent of GDP): 2015: 25.1; 2016: 25.7; 2017: 25.6; 2018: 25.0; 2019: 24.7\n  - Expenditures (percent of GDP): 2015: 32.0; 2016: 32.5; 2017: 33.0; 2018: 31.1\n  - Current expenditures (percent of GDP): 2015: 24.2; 2016: 24.0; 2017: 23.1; 2018: (value shown in table)\n  - Capital spending and budget lending (percent of GDP): 2015: 7.0; 2016: 8.3; 2017: 8.5; 2018: 8.1; 2019: 7.9\n  - Net Lending/Borrowing (GFSM 2001): 2015: -1.3; 2016: -1.6; 2017: -1.1; 2018: -0.5; 2019: -1.5\n  - Augmented Net lending / borrowing (Program definition) 2/: 2015: -2.7; 2016: -3.0; 2017: -3.6; 2018: -2.9; 2019: -2.8; (additional column) -2.6\n- Public debt (percent of GDP):\n  - 2015: 44.4\n  - 2016: 42.3\n  - 2017: 44.9\n  - 2018: 42.7\n  - 2019: 42.8, 43.5\n  - o.w. NBG debt to the IMF: 2016: …; 2017: 0.5; 2018: 0.6; 2019: 1.0\n  - o.w. Foreign-currency denominated (percent of GDP): 2015: 35.1; 2016: 35.6; 2017: 33.2\n- Credit to the private sector (annual percentage change):\n  - 2015: 22.1\n  - 2016: 19.6\n  - 2017: 10.1\n  - 2018: 17.6\n  - 2019: 14.3, 14.1, 10.6\n  - In constant exchange rate: 2015: 12.0; 2016: 15.5; 2017: 20.1; 2018: 18.0; 2019: 10.7\n- Broad money (annual percentage change):\n  - 2015: 19.2\n  - 2016: 20.4\n  - 2017: 9.8\n  - 2018: 14.8\n  - 2019: 12.6, 11.0\n  - Broad money (incl. fx deposits, annual percentage change): 2015: 23.4; 2016: 19.1; 2017: 13.7; 2018: 13.4; 2019: 10.5, 10.0\n  - Additional series in table: 5.1; 13.3; 14.7; 16.2; 11.1\n- Deposit dollarization (in percent of total):\n  - 2015: 66.8\n  - 2016: 69.9\n  - 2017: 64.8\n  - 2018: 63.7\n  - 2019: 64.1, 59.7, 57.5\n- Credit dollarization (in percent of total):\n  - 2015: 63.1\n  - 2016: 64.6\n  - 2017: 54.7\n  - 2018: 56.1\n  - 2019: 54.1, 50.7, 48.3\n- Credit to GDP:\n  - 2015: 49.2\n  - 2016: 54.9\n  - 2017: 55.3\n  - 2018: 57.8\n  - 2019: 58.5, 60.6, 61.9\n- External sector (in percent of GDP; unless otherwise indicated):\n  - Current account balance:\n    - 2015: -12.0\n    - 2016: -12.8\n    - 2017: -10.4\n    - 2018: -8.7\n    - 2019: -10.6, -9.2\n  - Trade balance:\n    - 2015: -28.1\n    - 2016: -26.9\n    - 2017: -25.8\n    - 2018: -25.3\n    - 2019: -26.4, -27.2, -27.1\n  - Terms of trade (ratio): 2015: 100.0; 2016: 98.9; 2017: 99.1; 2018: 96.1; 2019: 99.3, 94.3, 94.5\n  - Gross international reserves (in billions of US$): 2015: 2.5; 2016: 3.6\n  - In percent of IMF Composite measure (floating): 2015: 89.9; 2016: 90.9; 2017: 93.3; 2018: 90.1; 2019: 95.2, 98.8\n  - Gross external debt:\n    - 2015: 107.6\n    - 2016: 109.3\n    - 2017: 106.9\n    - 2018: 112.8\n    - 2019: 106.4, 107.9\n  - Gross external debt, excl. intercompany loans:\n    - 2015: 86.1\n    - 2016: 91.8\n    - 2017: 87.4\n    - 2018: 95.6\n    - 2019: 86.5, 90.6\n  - Laris per U.S. dollar (period average): 2015: 2.27; 2016: 2.37; 2017: 2.51\n  - Laris per euro (period average): 2015: 2.52; 2016: 2.62; 2017: 2.83\n  - REER (period average; CPI based, 2010=100): 2015: 104.0; 2016: 107.5\n\n- Sources cited in the table: Georgian authorities; and Fund staff estimates.\n- Footnotes present in source:\n  - 1/ Please refer to this link for details http://www.imf.org/en/Publications/CR/Issues/2017/12/07/Georgia-First-Review-under-the-Extended-Fund-Facility-and-Request-for-Modification-of-45448 .\n  - 2/ Augmented Net lending / borrowing (Program definition) = Net lending / borrowing - Budget lending.\n\nIMF Communications Department — Press Release No. 18/266 (June 28, 2018).\n\n---\n\n Content in this bundle\n\n- Pr18266g (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Georgia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/en/Publications/CR/Issues/2017/12/07/Georgia-First-Review-under-the-Extended-Fund-Facility-and-Request-for-Modification-of-45448\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/06/28/pr18266-imf-executive-board-concludes-2018-article-iv-consultation-with-georgia"
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    "Published: June 28, 2018",
    "On June 27, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Georgia.",
    "Since the global financial crisis, macroeconomic performance in Georgia has been positive: growth exceeded most peers, policy frameworks were strengthened with inflation well-anchored, fiscal deficits were broadly well-managed, the banking sector remained stable despite a large exchange rate depreciation, and foreign reserves increased.",
    "Real GDP growth: 5 percent in 2107. (Text states \"real GDP grew 5 percent in 2107.\")",
    "Annual inflation: 6.7 percent at end-2017; fell to 2.5 percent in April 2018 as one-off shocks (increase in excises) dissipated.",
    "Fiscal position in 2017: remained stable while allowing a considerable ramp up in public investment, supported by revenue measures, strengthened recovery, and reduction in current spending.",
    "External accounts in 2017:",
    "Drivers of growth: external demand, buoyant consumption, rapid growth in exports, tourism, and remittances.",
    "Near-term outlook: improved moderately; the output gap is expected to close gradually in 2019–20.",
    "Medium- to long-term: growth expected to accelerate moderately and external vulnerabilities to decrease due to dividends from structural reforms.",
    "Risks (characterization: balanced):",
    "Policy implication: stronger demand in the presence of structural bottlenecks could result in demand pressures and require policy tightening.",
    "Fiscal:",
    "Monetary and financial:",
    "Structural reforms:",
    "Directors agreed with the thrust of the staff appraisal.",
    "Commendations:",
    "Observations and recommendations:",
    "Real GDP (annual percentage change):",
    "Nominal GDP (in billion of laris):",
    "Nominal GDP (in billion of U.S. dollars):",
    "GDP per capita (in thousand of U.S. dollars):",
    "CPI, End-of-period:",
    "Gross national saving (in percent of GDP):",
    "Investment (in percent of GDP):",
    "Consolidated government operations:",
    "Public debt (percent of GDP):",
    "Credit to the private sector (annual percentage change):",
    "Broad money (annual percentage change):",
    "Deposit dollarization (in percent of total):",
    "Credit dollarization (in percent of total):",
    "Credit to GDP:",
    "External sector (in percent of GDP; unless otherwise indicated):",
    "Sources cited in the table: Georgian authorities; and Fund staff estimates.",
    "Footnotes present in source:",
    "[Pr18266g (PDF)](/external/lang/georgian/np/sec/pr/2018/pr18266g.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Georgia and the IMF](http://www.imf.org/external/country/GEO/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/en/Publications/CR/Issues/2017/12/07/Georgia-First-Review-under-the-Extended-Fund-Facility-and-Request-for-Modification-of-45448](http://www.imf.org/en/Publications/CR/Issues/2017/12/07/Georgia-First-Review-under-the-Extended-Fund-Facility-and-Request-for-Modification-of-45448)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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