As per the Budget Code, following the delivery of macroeconomic forecasts and information concerning basic directions of Georgia's ministries by the government of Georgia to the parliament, the Parliamentary Budget Office (PBO) is publishing its independent forecasts. The forecast contains baseline scenario, as well as positive and negative scenarios.

According to the Parliamentary Budget Office forecast, the Georgian economy will increase by 8.0% in 2021. The real GDP 2021 growth forecast (8.0%) is by 0.3 percentage points (pp) higher compared to the government forecast (7.7%) and differs by 2.8 pp from the PBO forecast of December 2020. As it is known, the negative consequences caused by the new Coronavirus (Covid-19) in the world have affected almost all countries, including Georgia. Therefore, a significant decline in economic growth was observed in 2020 (-6.2%). Expected GDP growth in 2021 is mainly driven by the base effect of a high reduction in 2020 caused by the COVID-19 pandemic and by the easing/canceling of the pandemic-related restrictions, which stimulate both demand and supply growth. Along with the vaccination process and easing/canceling of the various types of restrictions, external trade will also start to recover. Compared to the December estimate, this forecast considers additional information available for the current period. The improvement in economic growth is due to the significantly better development trend for the current period. High economic growth, observed in April-May, also external trade figures, indicating a gradual recovery in the economic activity. In the 2021 assessment, uncertainty around the forecast remains. Together with an analysis of fundamental economic developments for forecasting, it is necessary to have some assumptions about the pandemic, which could significantly affect the accuracy of the forecast in case of changes. The mentioned forecast of the PBO incorporates the assumption that the epidemiological situation in Georgia will improve, and the vaccination will reduce the rate of the virus spread. The assumption also takes into account domestic economic activity, as well as - preliminary estimates and forecasts of the economic growth of Georgia's major trading partner countries. Specifically:
• The positive outlook for 2021 is due to the fact that the measures taken to prevent Covid-19 (state of emergency and various restrictions) have broken the so-called "Global value chain" however, as it seems by 2021, economic actors are better adapted to the pandemic and the so-called "value chain" will be restored both within the country and worldwide.
• In addition, it is likely that in parallel with the adaptation to the pandemic, the tourism sector will revive, and both exports and imports of services will increase by 2021.
• The economic growth forecast for 2021 increased from 5.2% to 8.0% compared to the December estimate, mainly due to the significantly better development trend compare to the previous expectation.
• In response to the rising inflation, the National Bank has raised the monetary policy rate since April 2021 to 9.5%. The Monetary Policy Committee of the National Bank of Georgia decided to leave the refinancing rate unchanged at 9.5 percent on June 23, 2021. According to the PBO forecasts, further growth in the inflation rate might happen, and inflation might also remain higher than its target value in the first half of 2022. In parallel with this trend, monetary policy tightening may continue, which will have a negative impact on the economy. This assumption negatively affected the forecast for 2021-2022.
According to the forecast of the Parliamentary Budget Office, the expected ratio of the net lending/borrowing balance of the consolidated budget (GFSM 2014) to GDP is -6.8% by 2021. This figure is 0.14 pp lower than the corresponding figure presented by the government (-7.0%), mainly due to the different projections of the tax revenues of the consolidated budget, as well as the GDP forecast. It should be highlighted that, for consolidated budget expenditures, the PBO forecasts are based on the medium-term fiscal plan defined by the government's Basic Data and Directions Document.
According to the PBO, the expected current account deficit for 2021 is 10.5% of GDP, while the government's forecast is 10.4% of GDP. The PBO estimates that the current account balance will start to improve from 2022 and will be formed around -7.1% of GDP on average. According to the government forecast, the deficit will start improving from 2022 and be around -7.5% of GDP on average.

For more details about updated forecasts of other economic variables, see the full document.