Slowdown of economic growth
The overall macroeconomic situation in Georgia re-mains stable. Economic growth amounted to 5.4% in the first half of 2018. However, a slowdown took place in the second half of the year, which will con-tinue in 2019. As a result, Georgia will grow at a moderate rate of 4.6% in 2019.
Inflation is under control. In 2018, consumer prices will rise by only 2.8%; thus, the National Bank will meet its target of 3%. The recent depreciation against the US dollar can be explained by seasonal factors and by the turbulent campaign preceding the presi-dential elections. In our view, there is no reason for sizeable action by the National Bank.
In 2018, the current account deficit will increase to 10.5% of GDP. While we see no immediate problem, such a level increases the vulnerability to external shocks. This shows the need for promoting exports.
The fiscal situation is solid, with a budget deficit of 2.3% of GDP in 2018. We expect a continuation of this prudent fiscal policy in 2019.
All in all, the outlook is positive. Nevertheless, the authorities need to be vigilant, especially in light of higher external risks for the country.