Newsletter Issue 32 | January – February 2020

Strong economic growth despite Russian sanctions

In spite of the Russian sanctions, Georgia’s economic growth was high reaching 5.2% in 2019. The successful absorption of this external shock demonstrates the strong resilience of the Georgian economy, which will grow by more than 4% also in 2020.

The announcement of Russian sanctions in June 2019 caused uncertainty, which led to a depreciation of the Lari by 7.3% by the end of the year. As a consequence, inflation significantly surpassed the National Bank’s target reaching 7.0% by end-2019. The National Bank, however, reacted appropriately by strongly increasing the policy rate to 9.0% and intervening on the foreign exchange market. Inflation will decrease during 2020.

External trade developed positively: goods exports in-creased by 12%, imports decreased by 1% yoy. The surplus in the services trade balance could be sus-tained despite the sanctions in the tourism sector. Tourism revenues have not decreased.

The budget deficit was at 2.1% in 2019 and thus in line with the IMF programme. The extension of the pro-gramme beyond parliamentary elections in autumn 2020 was an important move for maintaining fiscal stability.

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