Georgian Government Questions IMF Forecast
17 October, 2013
Georgian Government Questions IMF Forecast
The recent report of International Monetary Fund on World Economic Outlook for October of 2013 nearly halved the economic growth forecast for Georgia from 4% and 6% predicted in June and January of 2013 to 2.5%. The IMF also predicted 1.7% increase of unemployment rate in Georgia this year. Georgian government questions the IMF data and asks for revision.
IMF explains the decline in economic growth in Georgia by slower private investment, weak credit growth, and budget under-spending. The forecast
of Georgia’s economic growth lags behind an average indicator of the region, fixed at 5.8% and low-income countries of Commonwealth of Independent States averaging 6%. The IMF forecasts higher economic growth in Azerbaijan, Armenia and Turkey than in Georgia putting out 3.5%, 4.6%, 3.8% and 2.5% respectively. The unemployment in Georgia will increase by 1.7% compared to the previous year and will reach 16.7%. Moreover, a further increase in this indicator to 17.3% is expected in 2014. According to IMF, the unemployment will increase only insignificantly in Azerbaijan, Russia and Turkey than in Georgia.
Nodar Khaduri, Minister of Finances of Georgia, completely disagrees with the downsizing forecast of IMF for Georgia in particular on increased unemployment rate and calls the latter projection “unimaginable”. He has just held a visit in Washington where he participated in an annual IMF conference, had meetings with Director Executive of the European Bank for Reconstruction and Development in Turkey and Vice President of European Investment Bank. Khaduri claims the IMF Executive Director is also surprised and pledges to revise the reported data.
“I am surprised at an absolutely unimaginable negative prognosis of IMF on unemployment rate. There was no communication to Georgian Government and Ministry of Finances respective to the issue. No factual data proves that problems like that may come on the way,” Khaduri told InterPressNews.
Overall, growth in European CIS economies, including Russia, slowed in the first half of 2013. Soft external demand was a factor but weak domestic investment also factored high particularly where output gaps were small and supply constraints were binding. In Caucasus and Central Asia (CCA) however economic activity continued to grow at a strong pace as in 2012, supported by an expansion of productive capacity in extractive sectors for the commodity exporters, as well as a stable inflow of remittances thus far, the Report reads. For CCA [Caucasus and Central Asia] commodity importers however a large share of longer-term instruments in financing of their current account deficits would be a mitigating factor. The lower-than-anticipated growth in emerging market economies elsewhere would lower commodity prices and have a large negative impact on activity in Russia, Ukraine, and CCA commodity exporters. Given the prominence of Russia in trade, and remittance flows in the region, the CCA commodity importers would be affected indirectly through the sharper-than-expected slowdown in Russia from 3.4% of GDP growth of 2012 to projected 1.5% this year. The IMF report anticipates that this year’s policy rate cuts should help reduce deflationary pressures in Georgia. Though, resolution of recent political uncertainty is needed to restore investor confidence in the country.
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