Georgia Economic Outlook
Economic activity growth cooled to 5.7% year on year in July–August after GDP expanded 7.5% in Q2. Rising output in the construction, financial and trade industries drove the overall expansion in July–August. Meanwhile, manufacturing activity rebounded in August after shrinking in July. Less positively, activity contracted in the information and communication sector, thus weighing on the overall upturn. Externally, imports growth markedly outpaced that of exports in Q3. This, coupled with lower inflation and a less-restrictive monetary policy backdrop, signals stronger spending and investment growth in Q3. In other news, looming political tensions continue to hurt the business environment; deep political divisions and a complicated relationship with Russia prompted an impeachment attempt—which failed—of President Zourabichvili in mid-October.
Inflation ticked down to 0.7% in September from 0.9% in August. Cooling price pressures for miscellaneous goods and services, hospitality and education drove the decrease. Additionally, prices for health and transport continued to decline notably at the end of Q3. Inflation should average close to the Central Bank’s target of 3.0% next year on lower interest rates.