Georgia’s gross domestic product (GDP) grew by an estimated 6.0% in the first half of 2014, following a relatively flat performance in 2013. Growth was driven by higher domestic demand, exports, foreign direct investment, and remittances, as a low refinancing rate and increased fiscal stimulus improved business confidence. Despite the strong first half, the Asian Development Outlook (ADO) 2014 Update maintains the 2014 growth forecast and lowers the 2015 estimate by half a percentage point because of the growth slowdown in the Russian Federation and continuing geopolitical uncertainty.
|Selected Economic Indicators (%) - Georgia||2014||2015|
|ADO 2014||Update||ADO 2014||Update|
|Current Account Balance (share of GDP)||-8.0||-8.5||-7.5||-7.5|
Source: ADB estimates.
Inflation forecasts remain unchanged from those made in ADO 2014 for both years. Annual inflation rose to 2.8% by July 2014 (versus reported deflation in 2013) as food and utility prices increased in the first half of 2014. Higher demand-side inflationary pressures, driven by expanded fiscal stimulus and an accommodating monetary policy that should boost lending, are expected to fuel inflation in 2015.
Exports rose by 14.9% in the first half of 2014, sharply above the 8.5% recorded for the corresponding period of 2013. Imports grew even more, by 15.8%, partly reflecting a steep rise in investment inflows - and causing the trade deficit in the first half of the year to deteriorate by 16.3% to $2.6 billion. Growth in remittances in the first half slowed to 4.2%, reflecting a 3.1% decline in remittance inflows from the Russian Federation. In view of these developments, the forecast current account deficit for 2014 is raised by half a percentage point. However, the deficit forecast for 2015 remains unchanged.
Source: ADB. 2014. Asian Development Outlook 2014 Update. Manila.