2015年-世界发展银行全球_Georgia_Economic_Update_Fall_2015___Absorbing_External_Shocks_22页_1mb

Georgia Economic Update Summary - Fall 2015

Core Content Overview

This report provides an economic update on Georgia for the first half of 2015, focusing on macroeconomic trends, political developments, and the impact of external shocks on the economy. It highlights key indicators such as GDP growth, fiscal policy, public debt, and labor market conditions, as well as the role of the energy sector and international trade.

Main Economic Developments

GDP Growth and External Shocks

• GDP growth slowed to 2.8% in the first half of 2015, down from 6.2% in the same period in 2014, influenced by "base effects."
• GDP growth volatility increased since 2012, as shown in Figure 1.
• Investment contributed significantly to growth, rising by 12.3% in the first half of 2015, with public investment expanding by 70% in real terms.
• Private investment increased by about 6% during the same period.
• Net foreign transfers rose by 30%, but private remittances declined sharply due to worsening labor markets in Russia, Greece, and Ukraine.

Trade and Export Performance

• Exports of goods and services increased by just 1.3% year-on-year, but declined by 14% in dollar terms due to deteriorating trade terms with Russia, Azerbaijan, Turkey, and Ukraine.
• Azerbaijan saw a 55% drop in exports, reducing total exports by 10%, while exports to the EU remained stable in nominal terms.
• Imports fell by 9% year-on-year, but the trade deficit widened due to the drop in exports.
• International tourist arrivals remained stable, though a rising share of transit passengers may be offsetting a decline in longer-term visitors.

Current Account and Fiscal Policy

• The current account deficit widened to 12% of GDP in the first half of 2015, up from 10.7% in the same period in 2014.
• FDI recovered in the second quarter, covering 53% of the deficit, though it was insufficient to fully offset the shortfall.
• The fiscal deficit is projected to reach 3% of GDP in 2015, down from 3.4% in the original budget.
• Tax revenues rose by 12%, driven by improved tax administration and higher import-related VAT collection.
• Non-tax revenues increased by 24% due to the depreciation of the lari, which boosted the relative value of foreign assistance.
• Public spending remained in line with the budget, with an execution rate of over 96%, though the health sector overspent by 1%.
• Capital expenditures were executed at 88%, reflecting challenges in implementing public investment projects.

Public Debt and Currency Depreciation

• The public debt stock is expected to increase from 36% to 46% of GDP in 2015, largely due to currency depreciation.
• 80% of public debt is denominated in US dollars, making it vulnerable to exchange rate fluctuations.
• The lari depreciated by about 36% in nominal terms since end-October 2014, leading to a sharp increase in the public debt-to-GDP ratio.
• Nominal depreciation exceeded real depreciation by 6.6% year-on-year, pushing inflation to 5.4% in August 2015, above the central bank's target of 5%.
• The central bank increased the policy rate from 4% in January 2015 to 7% in September 2015 to control inflation expectations.

Key Trends and Statistics

Labor Market

• The unemployment rate fell from 14.6% in 2013 to 12.4% in 2014, driven by demographic trends.
• Urban employment growth was a major contributor, while rural unemployment also declined.
• Wage growth increased by 8% in 2014, with the enterprise sector showing strong wage growth of 7.6% in Q1 2015.
• Agricultural employment rose by over 20% in the first half of 2015, but agricultural output grew only by 1.5% in 2014 and 3.9% in Q1 2015.

Poverty Reduction

• Poverty rates decreased consistently over the past decade, with the moderate poverty rate falling from 73.3% in 2013 to 69.4% in 2014.
• The extreme poverty rate dropped from 36% to 32.3% during the same period.
• Social transfers and agricultural income were the main contributors to poverty reduction, accounting for about half of the decline.
• Rural poverty remained higher than urban poverty, with a rate of 41% compared to 21% in 2014.

Fiscal and Debt Sustainability

• The fiscal deficit is expected to narrow to 3% of GDP in 2015, down from 3.4% in the original budget.
• The government has targeted savings of about GEL 160 million across various budget categories, with some redirected to infrastructure projects.
• The new 2016 budget emphasizes social spending, with increases in pensions, social safety nets, and healthcare, though capital projects receive minimal additional funding.
• The debt service to exports ratio is expected to decline slightly from 5% in 2014 to 4% in 2015 due to the concessional nature of most external debt.
• Domestic debt increased by 32% to 11% of GDP, with treasury bills of varying maturity representing the largest share.

Political Developments

• A vote of confidence was held in late April 2015, following the resignation of three ministers from the Free Democrats Party.
• The Georgian Dream Party retained its parliamentary majority, with 12 members of the United National Movement joining the coalition.
• The new cabinet was approved by Parliament in early May, with the economic team remaining unchanged.

Energy Sector Development

• The energy sector is a focus area, with discussions on its benefits and risks.
• Public debt and external sector dynamics are closely linked to energy development, with implications for fiscal sustainability and exchange rate stability.

Conclusion

The report underscores the challenges Georgia faces in maintaining economic stability amidst external shocks, particularly in the context of currency depreciation and a slowing global economy. While the country has managed to maintain a relatively stable financial sector and control inflation, long-term sustainability remains a concern due to rising public debt and the need for structural reforms. The outlook for 2016 is cautiously optimistic, with potential for growth driven by improved external conditions, FDI inflows, and the implementation of the DCFTA with the EU.