IMF Staff Concludes Visit to Georgia

IMF News, February 12, 2020

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IMF team led by Ms. Mercedes Vera-Martin visited Tbilisi during February 5-11, 2020 to discuss recent economic and financial developments and progress with structural reforms.
End-of-Mission press release; views 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.

2019 real GDP growth: 5.2 percent (preliminary estimate), compared with IMF-projected 4.6 percent.
Current account deficit in 2019: declined to a record low of 4.4 percent of GDP.
Exports increased by 12 percent (y/y) in 2019.
Import growth remained broadly flat despite robust domestic demand.

Inflation reached 7 percent (y/y) at end-2019 and declined to 6.4 percent (y/y) in January.
Policy recommendation: continue tight monetary policy for as long as needed to bring inflation down to the 3-percent target by end-2020.
Additional measures advised: maintain exchange rate flexibility and build up foreign exchange reserves.

Despite higher policy rates, credit growth remained sustained, partly supported by lower foreign exchange reserve requirements.
The team welcomes the new bank resolution legislation and steps taken to approve a new insolvency law.

Strong revenue growth allowed public investment to reach a record high of 8 percent of GDP without increasing the fiscal deficit.
Fiscal deficit in 2019: 2.1 percent of GDP.
2020 budget stance: appropriately targets a neutral fiscal stance.
Fiscal deficit projection for 2020: expected to increase slightly to 2.4 percent of GDP.
Policy recommendations:
- Continue a responsible fiscal policy and remain vigilant against a build-up in fiscal risks.
- Accelerate VAT refunds by introducing an automatic repayment system (welcomed by the team).
- Finalize the Public-Private Partnership framework and improve management of state-owned enterprises.

Advancing structural reforms is key to promoting higher resilience to external shocks and more inclusive medium-term growth.
The team welcomes:
- New bank resolution legislation.
- Steps to approve a new insolvency law.
Additional reform recommendations:
- Adopt an indexation rule for the basic public pension.
- Address infrastructure investment needs.
- Improve education to promote private-sector activity and create jobs.

Growth outlook for 2020: stable at 4.3 percent.
Risks: now balanced due to higher-than-envisaged economic activity in 2019 and an uncertain global outlook.
Inflation projection: projected to converge to the 3-percent target by end-2020 as tightened monetary policy takes effect and one-off effects dissipate.
Policy stance recommended given uncertainties: continued exchange rate flexibility, reserve buildup, and prudent macroeconomic policies.

The team looks forward to conducting discussions for the sixth review under the Extended Fund Facility in April.
The team thanked the authorities, technical team, and representatives of the private sector and development partners for open and candid discussions.

IMF Staff Concludes Visit to Georgia — Press Release No. 20/47 (February 12, 2020).

სსფ-ს მისიის ვიზიტი საქართველოში დასრულდა
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