The World Bank has published an Economic Update of the Europe and Central Asia region, which presents economic growth forecasts for the region and its countries, including Georgia, under the conditions of the impact of war in Ukraine and the consequences of the pandemic.
The report says the economic activity will remain “deeply depressed” through next year, with minimal growth of 0.3% expected in 2023, as energy price shocks continue to impact the region. Regional output is now expected to contract by 0.2% this year, reflecting above expectation growth in some of the region’s largest economies and the prudent extension of pandemic-era stimulus programs by some governments.
“In the South Caucasus sub region there is quite a strong growth trajectory, and we see output going up by 5.6%. In fact, that’s the largest increase in the entire Europe and Central Asia region.
When it comes to Georgia itself, we see a growth rate of 8.8%, which right now is the highest in the entire Europe and Central Asia region, largely based on an increase in domestic demand, increase in net money transfers, as well as a strong tourism receipts and remittances as well.
With this said, we believe that both government and the National Bank of Georgia need to remain vigilant. Certainly, there needs to be a tightening of monetary policy, should the inflation still tick upwards. And we encourage, of course, government to remain fiscally prudent and to use any additional revenues to pay off as some of its fiscal burden and to act in a fiscally prudent manner.
The outlook looks rather challenging for the European and Central Asia region (ECA region). The WB expects output to contract by 0.2% in 2022, largely due to the Russia’s invasion of Ukraine.
And we expect that growth overall in the ECA region will remain low at about 0.3%, given the current high inflation rates, the global tightening of financial markets and challenging fiscal situations in the region.
One final point is that the World Bank’s Economic Update will have a special focus on social protection measures, which are absolutely critical in terms of addressing large increases in poverty during crisis.
And here we advise all of our member countries to modernize their social protection systems, and to make sure that there is an appropriate TSA targeting the social assistance to those people who needed it most during these particular times of crisis”, - underlined Sebastian Molineus, World Bank Regional Director for the South Caucasus.