Georgian economy outperformed expectations in 2017
The Georgian economy develops positively. GDP grew by 4.3% in 2017 and is expected to continue with similar speed in 2018. Economic growth occurred on a broad base: It has been supported by consumption, investment and exports.
Inflation was at 5.8% in 2017 and thus exceeded the National Bank’s target. The reason was a one-off increase in excise taxes at the beginning of 2017. Thus, inflation is supposed to decrease significantly during 2018 to ca. 3%. Goods exports were supported by higher commodity prices and exports of services – especially revenues from tourism – increased remarkably. Thanks to these developments, the current account deficit decreased significantly: In the period from January to September it amounted to 7.4% of GDP after 11.9% in the same period of the previous year.
The budget deficit was at 3.6% of GDP in 2017 and thus met the provisions of the IMF programme. Revenues were higher than expected and provided space for additional investment into the East-West highway.
Despite this positive development Georgia is still a transition economy with a moderate GDP per capita of USD 4,100. Among the key challenges of economic policy are the modernisation of the agricultural sector, the improvement of vocational education and the reduction of dollarisation in the financial sector.