{
  "title": "IMF Executive Board Concludes 2024 Article IV Consultation with Georgia",
  "publication": "IMF News, May 24, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/05/24/pr-24181-georgia-imf-executive-board-concludes-2024-article-iv-consultation",
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  "summary": "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Georgia",
  "publishDate": "2024-05-24",
  "sections": [
    {
      "heading": "Macroeconomic outlook",
      "content": "- Financial inflows triggered by Russia’s war in Ukraine continue to moderate but remain above pre-war levels, supporting a positive macroeconomic outlook.\n- 2024 expectations:\n  - Growth is expected to ease but remain above trend.\n  - Inflation is expected to pick-up as monetary policy continues to normalize.\n  - The current account deficit is expected to widen from historic lows.\n- Medium-term convergence (staff projections):\n  - Growth would converge to its potential rate of 5 percent.\n  - Inflation to the National Bank of Georgia’s (NBG) 3 percent target.\n  - Current account deficit to 5.5 percent of GDP, supported by continued improvements in services exports."
    },
    {
      "heading": "Risks to the outlook",
      "content": "- Downside risks:\n  - A reversal of war-related migrant and financial inflows.\n  - Intensification of sanctions that affect Georgia and geo-economic fragmentation.\n  - A loss of reform momentum before the October Parliamentary elections.\n  - Growing concerns about governance.\n- Mitigating factors:\n  - Replenished fiscal and reserve buffers.\n  - Abundant bank capital and FX liquidity.\n- Upside potential:\n  - EU candidate status could send a positive signal, including for investments, if reforms gain impetus to move the accession process forward."
    },
    {
      "heading": "Policy stance and recent actions",
      "content": "- Monetary policy and central bank governance:\n  - The NBG has maintained a tight monetary policy stance, normalizing the policy rate gradually, while using macroprudential measures to address systemic risks.\n  - Despite significant foreign exchange purchases, reserves fell below the IMF’s adequacy metric.\n  - There remain gaps in the NBG Law regarding NBG governance and independence.\n- Fiscal policy and public finances:\n  - Adequate buffers have been maintained under the fiscal rules.\n  - Good progress on evaluating tax expenditures and strengthening public investment management.\n  - Progress has been slow on developing a Medium-Term Revenue Strategy.\n  - Slow progress on reforming SOEs to limit their fiscal risks.\n- Structural and labor-market policies:\n  - Authorities have taken significant steps to address entrenched high unemployment and diversify the economy, including by pursuing trade agreements and infrastructure investments.\n  - Challenges remain in improving the quality of education and productivity, particularly in the agricultural sector, and in bolstering the judicial system and the anti-corruption authority to strengthen governance.\n- Financial sector:\n  - Banking system resilience noted; proactive use of macroprudential and prudential measures.\n  - System remains highly concentrated and dollarized."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- General view:\n  - Directors agreed with the thrust of the staff appraisal and welcomed Georgia’s resilience in the face of multiple shocks.\n  - Directors noted continued strong macroeconomic performance but emphasized high global uncertainty and significant downside risks.\n  - Importance of continued Fund engagement to support resilience, structural reform, inclusive job-rich growth, and EU accession progress.\n- Fiscal policy recommendations:\n  - Support for continued modest medium term fiscal adjustment to ensure sufficient buffers under the fiscal rule, while creating room for social and infrastructure spending.\n  - Adjustment should be underpinned by a medium-term revenue strategy focused on streamlined tax expenditures and improved revenue administration, along with enhanced spending prioritization and efficiency.\n  - Prioritize state owned enterprise reform, particularly to strengthen oversight and governance.\n  - Encourage steadfast implementation of renewable energy development strategies.\n- Monetary and exchange rate policy recommendations:\n  - Commended the NBG’s prudent approach.\n  - Recommended a gradual and cautious, data driven approach to further policy rate cuts and clear communication to anchor inflation expectations.\n  - Emphasized strengthening the NBG’s governance framework and independence to safeguard monetary policy credibility.\n  - Called for continued exchange rate flexibility and reserve accumulation, given high exposure to external shocks.\n- Financial sector recommendations:\n  - Maintain adequate capital and liquidity buffers amid high uncertainty in global financial conditions.\n  - Address high concentration and dollarization by improving competition in the banking system and strengthening macroeconomic policy frameworks.\n  - Urged continued vigilance against risks from capital inflows, virtual assets, and sanctions, and underscored the importance of strong AML/CFT controls.\n- Structural reforms and governance:\n  - Continue efforts to enhance infrastructure investments to foster regional connectivity and further diversify the economy.\n  - Enhance quality of education and improve agricultural productivity to address low rural labor force participation.\n  - Improve governance and anti-corruption frameworks; reform of the judicial system and the anti-corruption authority is important to improve the business environment."
    },
    {
      "heading": "Key economic and financial indicators (selected, 2022–2026)",
      "content": "- Real GDP (annual percentage change):\n  - 2022: 11.0\n  - 2023: 7.5\n  - 2024: 5.7\n  - 2025: 5.2\n  - 2026: 4.7\n- Nominal GDP (in billion of laris):\n  - 2022: 72.9\n  - 2023: 80.2\n  - 2024: 88.6\n  - 2025: 97.6\n  - 2026: 106.1\n- Nominal GDP (in billion of U.S. dollars):\n  - 2022: 25.0\n  - 2023: 30.5\n  - 2024: 32.9\n  - 2025: 35.6\n  - 2026: 38.2\n- GDP per capita (in thousand of U.S. dollars):\n  - 2022: 6.8\n  - 2023: 8.2\n  - 2024: 8.8\n  - 2025: 9.6\n  - 2026: 10.3\n- GDP deflator, period average:\n  - 2022: 8.1\n  - 2023: 2.5\n  - 2024: 4.4\n  - 2025: 3.8\n- CPI, period average:\n  - 2022: 11.9\n  - 2023: 2.6\n  - 2024: 4.2\n  - 2025: 3.4\n- CPI, end-of-period:\n  - 2022: 9.8\n  - 2023: 0.4\n  - 2024: 4.0\n  - 2025: 3.7\n  - 2026: 3.0\n- Consolidated government operations (in percent of GDP):\n  - Revenue and grants:\n    - 2022: 26.5\n    - 2023: 27.6\n    - 2024: 28.1\n    - 2025: 27.7\n  - o.w. Tax revenue:\n    - 2022: 23.7\n    - 2023: 24.6\n    - 2024: 25.5\n    - 2025: 25.4\n  - Total Expenditure:\n    - 2022: 29.0\n    - 2023: 29.9\n    - 2024: 30.7\n    - 2025: 29.8\n  - Current expenditures:\n    - 2022: 21.4\n    - 2023: 22.3\n    - 2024: 23.1\n    - 2025: 23.3\n    - 2026: 23.2\n  - Net acquisition of nonfinancial assets:\n    - 2022: 7.6\n    - 2023: 6.6\n    - 2024: 6.5\n  - Net lending/borrowing (GFSM 2001):\n    - 2022: -2.6\n    - 2023: -2.3\n    - 2024: -2.5\n    - 2025: -2.2\n  - Augmented net lending/borrowing 1/:\n    - 2022: -3.1\n  - Public debt:\n    - 2022: 39.2\n    - 2023: 38.8\n    - 2024: 37.8\n    - 2025: 37.5\n    - o.w. Foreign-currency denominated:\n      - 2022: 29.4\n      - 2023: 28.5\n      - 2024: 27.0\n      - 2025: 25.6\n      - 2026: 24.3\n- Money and credit:\n  - Credit to the private sector:\n    - 2022: 16.5\n    - 2023: 15.0\n    - 2024: 12.2\n    - 2025: 8.7\n  - In constant exchange rate:\n    - 2022: 12.1\n    - 2023: 17.1\n    - 2024: 16.4\n    - 2025: 11.6\n  - Broad money:\n    - 2022: 14.9\n    - 2023: 12.5\n    - 2024: 12.3\n    - 2025: 11.3\n  - Excluding FX deposits:\n    - 2022: 22.9\n    - 2023: 26.9\n    - 2024: 12.9\n    - 2025: 12.7\n    - 2026: 11.7\n  - Deposit dollarization (in percent of total):\n    - 2022: 56.1\n    - 2023: 47.0\n    - 2024: 46.8\n    - 2025: 46.5\n    - 2026: 46.3\n  - Credit dollarization (in percent of total):\n    - 2022: 45.0\n    - 2023: 44.5\n    - 2024: 44.1\n    - 2025: 43.7\n    - 2026: 43.3\n  - Credit to GDP (in percent) 2/:\n    - 2022: 60.3\n    - 2023: 63.8\n    - 2024: 66.5\n    - 2025: 67.7\n- External sector (in percent of GDP; unless otherwise indicated):\n  - Current account balance (in billions of US$):\n    - 2022: -1.1\n    - 2023: -1.3\n    - 2024: -1.9\n    - 2025: -2.0\n    - 2026: -2.1\n  - Current account balance:\n    - 2022: -4.5\n    - 2023: -4.3\n    - 2024: -5.8\n    - 2025: -5.6\n    - 2026: -5.5\n  - Trade balance:\n    - 2022: -20.4\n    - 2023: -20.0\n    - 2024: -20.8\n    - 2025: -20.9\n  - Terms of trade (percent change):\n    - 2022: 5.4\n    - 2023: 0.5\n    - 2024: -0.2\n    - 2025: 0.1\n  - Gross international reserves (in billions of US$):\n    - 2022: 4.9\n    - 2023: 5.0\n    - 2024: 5.6\n  - In percent of IMF ARA metric 3/:\n    - 2022: 102.2\n    - 2023: 95.5\n    - 2024: 94.8\n    - 2025: 97.8\n    - 2026: 99.7\n  - Gross external debt:\n    - 2022: 81.0\n    - 2023: 70.2\n    - 2024: 66.7\n    - 2025: 62.8\n    - 2026: 58.5"
    },
    {
      "heading": "Institutional note",
      "content": "- It is expected that the next Article IV consultation with Georgia will be held on the standard 12-month cycle.\n\nPress Release No. 24/181 — IMF Communications Department, May 24, 2024\n\n---\n\n\n References\n\n- Georgia and the IMF\n- IMF Policy Advice -- A Factsheet\n- The IMF and Good Governance -- A Factsheet\n- Press Releases\n- PRESS CENTER\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/2024/05/24/pr-24181-georgia-imf-executive-board-concludes-2024-article-iv-consultation"
    }
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    "Published: May 24, 2024",
    "Financial inflows triggered by Russia’s war in Ukraine continue to moderate but remain above pre-war levels, supporting a positive macroeconomic outlook.",
    "2024 expectations:",
    "Medium-term convergence (staff projections):",
    "Downside risks:",
    "Mitigating factors:",
    "Upside potential:",
    "Monetary policy and central bank governance:",
    "Fiscal policy and public finances:",
    "Structural and labor-market policies:",
    "Financial sector:",
    "General view:",
    "Fiscal policy recommendations:",
    "Monetary and exchange rate policy recommendations:",
    "Financial sector recommendations:",
    "Structural reforms and governance:",
    "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):",
    "GDP deflator, period average:",
    "CPI, period average:",
    "CPI, end-of-period:",
    "Consolidated government operations (in percent of GDP):",
    "Money and credit:",
    "External sector (in percent of GDP; unless otherwise indicated):",
    "It is expected that the next Article IV consultation with Georgia will be held on the standard 12-month cycle.",
    "[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)",
    "[The IMF and Good Governance -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/the-imf-and-good-governance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[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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