In line with its mandate, the Parliamentary Budget Office (PBO) provides its Annual Macroeconomic Outlook, which aims to analyze core indicators of economic sectors (real, external, fiscal, monetary) in Georgia.
The Annual Macroeconomic Outlook includes the following components:
- Assessment of real economic sector, which includes an assessment of economic growth; analysis of GDP by activities and by expenditure components; assessment of factor productivity; estimation of potential GDP; and GDP forecast for 2016.
- Assessment of external sector, which includes a review of current account balance; an evaluation of the main determninats of exports and imports; and an assessment of external sector as a key component of sustainable development.
- Assessment of fiscal sector, which includes a review of consolidated budget and analysis of total tax revenue and its componenets.
- Assessment of monetary sector, which includes a review of inflation and monetary aggregates; assessment of demand for money; and estimation of credit gap in the economy.
Methodological aspects used in the Annual Macroeconomic Outlook are represented in various PBO’s reseach papers, which are publicly available on the PBO’s website. PBO’s research papers include papers that provide technical descriptions of official PBO’s analyses. Through those papers, PBO aims to enhance the transparency of its work and to encourage external review of that work.
Main fidings of the outlook are summarized as follows:
- Real gross domestic product (GDP) increased at annual rate of 2.8% in 2015;
- In 2015, construction activity had largest contribution to economic growth rate (0.92%) in Georgia;
- In 2015, aggregate consumption and investment expenditures contributions to GDP growth were 7.8%. However, net exports contribution in this respect was negative (-5.1%);
- According to the PBO’s estimation, output elasticities of capital and labor are 0.44 and 0.56, respectively;
- In 2015, the output gap was negative (-1.3%);
- In 2015, trade balance of commodities as a percentage of GDP decreased by 4.9% points that negatively affected current account balance;
- According to the PBO’s estimation, appreciation of real exchange rate by 1% is associated with decrease in net export of 0.33% of GDP and vice versa;
- According to the PBO’s estimation, debt-stabilizing current account balance was -7.8% in 2015;
- Georgian taxation system is a good automatic stabilizer (short-run buoyancy 1.18) and in ceteris paribus, it promotes fiscal sustainability in the long-run (long-run buoyancy 1.41);
- Estimating the function of demand for real money shows that if the economy grows by 5% - 6% while targeted inflation (5%) is maintained, then broad money M3 should increase by 17 – 20%;
- Estimation result of the credit gap shows that it did not exceed the 2% limit in 2015, meaning that instability in the financial system disappeared after the global financial and economic crisis.