TBILISI (Reuters) – The International Monetary Fund (IMF) is expecting a 5% contraction in Georgia's coronavirus-affected economy this year and expects that the possible realization of risks may require maintaining exchange rate flexibility and additional assistance.
The IMF previously predicted a 4% contraction in the country's economy in 2020 and a return to growth of 4% in 2021. The Georgian authorities at this stage predict that the economy will contract by 4% this year.
“The economy is expected to contract by 5% … partly reflecting a more severe slowdown in the second quarter of 2020 and a longer recovery in external demand,” the IMF said in a statement following virtual meetings of Fund members with government officials on September 8-14. Georgia.
The IMF believes that, given widespread uncertainty about the pandemic, risks prevailed this year, which included a longer slowdown in growth in major trading partners and a slower-than-anticipated recovery in tourism.
The fund welcomed the measures taken by the country's authorities, which include a temporary exemption from property and income taxes for tourism-related businesses, a doubling of the value-added tax refunded to them, a temporary exemption for individuals from paying interest on bank loans, and the introduction of benefits for utilities. and also the restructuring of loans to entrepreneurs who are experiencing difficulties with payments.
“Over the medium term, addressing revenue cuts in 2020 will be important to design gradual fiscal consolidation as required by the fiscal rule and create fiscal space for necessary spending on education and infrastructure,” the IMF said in a statement.
The IMF sees the right decision by the central bank to ease monetary policy in response to a slowdown in economic activity and easing inflationary pressures.
The National Bank of Georgia on Wednesday kept its key rate at 8.00%.
“Maintaining exchange rate flexibility remains important for managing shocks,” the IMF said.
“Structural reforms remain necessary to … promote higher and more inclusive growth.”
At the moment, Georgia with a population of 3.7 million has registered 2.758 cases of coronavirus infection; 19 patients have died, which is the lowest rate in the South Caucasus region.
However, the number of infections has been on the rise in the past 10 days, reaching 196 per day on Wednesday, the highest ever recorded during the pandemic.
This forced the authorities to reintroduce a number of restrictions and postpone the opening of theaters, cinemas and entertainment centers, as well as start the educational process in schools remotely.
(Margarita Antidze. Editor Dmitry Antonov)