According to the Parliamentary Budget Office forecast, the Georgian economy will increase by 5.6% in 2022. The real GDP 2022 growth forecast (5.6%) is 0.4 percentage points (pp) lower compared to the government forecast (6.0%) and differs (0.1 pp higher) from the PBO forecast of July 2021. 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%). However, it should be noted that significant economic growth has been observed since the second quarter of 2021, that 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, that also effects the 2022 forecast. Along with the vaccination process and easing/canceling of the various types of restrictions, external trade will also start to recover. Compared to the July estimate, this forecast takes into account 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 the second quarter of 2021 and beyond, also external trade figures, indicating a gradual recovery in the economic activity. In the 2022 assessment, 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, vaccination will reduce the rate of the virus spread, there will be no more restrictions and closures in the country, which will facilitate the partial recovery of foreign economic activity. 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:

• It is likely that in parallel with the adaptation to the pandemic, the tourism sector will revive in 2022 compared to 2021, and both exports and imports of services will increase.
• In response to the rising inflation, the National Bank has raised the monetary policy rate since August 2021 to 10%. The Monetary Policy Committee of the National Bank of Georgia decided to leave the refinancing rate unchanged at 10 percent on September 15, 2021. According to the PBO forecasts, inflation will decline in the first half of 2022 and will approach the target (3%) in the second half, which could lead to a reduction in the policy rate from the same period. It is worth mentioning that due to the high growth rate of inflation in the second quarter of 2021 and subsequent months, the budget office forecast for inflation in 2021-2022 is higher compared to the forecast of July this year.
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 -4.1% by 2022 (according to the July forecast it was -4.7%). This figure is lower than the corresponding figure presented by the government (-4.3%), 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 2022 is 8.4% of GDP, which is 1.5 pp lower than the PBO's forecast of July 2021 (9.9%), while the government's forecast is 8.3% of GDP. The PBO estimates that the current account balance will start improving from 2022 and will be formed around -7.0% of GDP on average. According to the government forecast, the deficit will start improving from 2022 and be around -6.9% of GDP on average.