## IMF Staff Concludes Virtual Review Mission to Georgia _IMF News, November 10, 2020_ ## Source details **Canonical URL:** [IMF Staff Concludes Virtual Review Mission to Georgia](https://www.imf.org/en/news/articles/2020/11/10/pr20336-georgia-imf-staff-concludes-virtual-review-mission) ## Other formats - [Markdown version](/en/news/articles/2020/11/10/pr20336-georgia-imf-staff-concludes-virtual-review-mission/index.md) - [Structured JSON version](/en/news/articles/2020/11/10/pr20336-georgia-imf-staff-concludes-virtual-review-mission/index.json) - [Bundle manifest](/en/news/articles/2020/11/10/pr20336-georgia-imf-staff-concludes-virtual-review-mission/bundle-manifest.json) ## Bibliographic details - Published: November 10, 2020 --- ### Mission outcome and program agreement - IMF staff led by Mercedes Vera Martin conducted virtual discussions from October 5 to November 9, 2020, on the Seventh Review under the Extended Fund Facility (EFF) arrangement. - Georgian authorities and the IMF team reached a staff-level agreement on the conclusion of the Seventh Review of the EFF arrangement. - The agreement is subject to approval by IMF management and the Executive Board; consideration by the Executive Board is expected in December 2020. - Completion of the review will make SDR79 million (about $112.1 million) available to Georgia, bringing total disbursements under the EFF arrangement to SDR406 million (about $576.4 million). ### Economic impact of COVID-19 and near-term outlook - The COVID-19 pandemic is expected to cause a contraction of 5 percent in GDP in 2020, one percentage point greater than projected at the time of the Sixth Review. - End-2020 inflation is projected at 3.5 percent. - The current account deficit is expected to widen to 9.7 percent of GDP in 2020, from 5.4 percent in 2019. - High remittances and lower imports have contained external financing needs; gross international reserves remain at comfortable levels due to the IMF augmentation and donor financing. - The fiscal deficit is expected to widen in 2020 due to lower tax revenues and fiscal support measures. - Preliminary data suggest a tentative recovery in domestic demand began in June 2020. - Growth in credit to the private sector has remained robust, partly supported by government subsidies on lari-denominated mortgages. - Recent combination of demand slack and post-lockdown supply recovery have put downward pressure on inflation. Key near- and medium-term projections: - GDP contraction in 2020: 5 percent. - GDP growth in 2021: rebound to 4.3 percent. - Revision in 2021 growth outlook (from 5 percent at the October 2020 WEO) attributed to regional conflict uncertainty and increased COVID-19 cases in Georgia. - Inflation expected to converge to the 3-percent target by end-2021. - Medium-term growth projected at 5¼ percent, supported by infrastructure spending and structural reforms. - Tourism receipts assumed to recover to 2019 levels only by 2024. - Current account deficit projected at 5.5 percent of GDP by 2025, financed predominantly by FDI. ### Monetary policy and financial sector resilience - The National Bank of Georgia (NBG) provided lari and dollar liquidity and coordinated with the Ministry of Finance for long-term lari liquidity provision. - The NBG reduced its policy rate by a cumulative 100 basis points since April 2020 and has maintained rates steady since August 2020. - Staff supports the current monetary stance, recommending it be maintained until clear signs show inflation remains on a downward trend in the context of recent lari depreciation. - Warning: keeping inflationary expectations anchored may call for tightening monetary policy should pressures on the lari exchange rate feed into expectations. - Banks have been generally resilient due to sound initial capital and liquidity positions and NBG support. - Staff welcomes the NBG’s proactive monitoring of asset quality and urges further progress in implementing the resolution framework. ### Fiscal policy response and medium-term fiscal framework - The easing of the fiscal stance in 2020 appropriately supported economic activity and protected jobs. - Fiscal support measures included wage subsidies, cash transfers to households (including those in the informal sector), expanded social transfers, and temporary tax reliefs for businesses. - Smoother budget execution helped accelerate public investment and VAT refunds. - Fiscal deficit projected to reach 8.7 percent of GDP in 2020. - 2021 Budget projects a deficit of 7.6 percent of GDP, including higher healthcare spending and measures to support households and businesses. - Authorities committed to medium-term fiscal sustainability as directed by Georgia’s fiscal rule, aiming to bring the fiscal deficit under 3 percent of GDP and public debt under 60 percent of GDP by 2023. - Authorities continue to monitor fiscal risks associated with energy purchasing power agreements and state-owned enterprises. ### Structural reforms and policy priorities - Advancing the structural reform agenda is essential to support recovery, limit economic scarring, and achieve stronger, resilient, and more inclusive growth. - Policy priorities and reforms highlighted: - Enhancing connectivity. - Facilitating access to finance. - Advancing the education reform. - Implementing the recently approved corporate insolvency framework. - Reforming state-owned enterprises to create conditions for a more efficient public sector and boost private sector development. ### Concluding remarks - The IMF team expressed solidarity with all Georgians impacted by the health crisis and thanked the authorities, international development partners, and private sector representatives for open and constructive discussions. *IMF Staff Concludes Virtual Review Mission to Georgia — Press Release No. 20/336, November 10, 2020* --- ## Content in this bundle - **Press Release-English** - [Press Release-English (Markdown version)](/-/media/files/news/press-release/2020/pr20336-geo-georgia.pdf.md){rel="alternate" type="text/markdown"} - [Press Release-English (PDF)](/-/media/files/news/press-release/2020/pr20336-geo-georgia.pdf){rel="external" type="application/pdf"} --- ## References - [Georgia and the IMF](http://www.imf.org/external/country/GEO/index.htm) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2020/11/10/pr20336-georgia-imf-staff-concludes-virtual-review-mission_