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Macroeconomic Forecasts - June 2019

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.

Major dynamics of the forecasted variables are as follows:

• The real GDP 2019 growth forecast (4.7%) exceeds the government forecast (4.5%) by 0.2 percentage points (pp) and does not differ from the PBO forecast of December 2018. The PBO December forecast was mainly based on two factors, out of which both actualized almost exactly the way they were assessed in December: The 2018 economic growth rate was adjusted to 4.7% from the preliminary 4.9%, while the April 2019 Global Economic Outlook has downgraded economic growth forecasts for major trading partner countries. Moreover, PBO has evaluated the retail loan regulations initiated by the National Bank of Georgia, in effect as of 1 January 2019. Taking these regulations into account, we expected credit to the national economy to decline in 2019, thus followed by a fall in aggregate demand. According to latest data, consumer loans have, in fact, declined (1% fall in April 2019 compared to December 2018), with its growth rate also having shrunk. It should be noted that the PBO medium run forecast (5.4%) takes into account a planned/expected major increase in government capital expenditures (non-financial assets), the factual dynamics of which might have an impact on realization of PBO forecasts
• According to PBO forecast, in 2019 the consolidated budget overall balance (GFSM 2001) ratio to GDP will be equal to -2.4%. This differs by 0.2 pp from the overall balance given in BDD (-2.2%), which is caused by differences in forecasts of consolidated budget revenues and GDP. It should be stressed, as noted above, with respect to consolidated budget expenditures, that PBO forecasts treat the BDD medium run fiscal plan as the baseline scenario.
• According to PBO forecast, the expected current account deficit amounts to 6.7% of GDP in 2019, while the government forecast equals 7.1%. Both PBO and MOF project the current account balance having a rising trend (i.e. falling deficit). The PBO 2019 current account balance forecast differs from that of December 2018, which reflects different than expected external trends in 2018 and the expected decrease of the 2019 current account deficit. According both, PBO and MOF, The main driver of the expected fall in the current account deficit is forecasted growth in domestic savings.

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