COVID-19 Impact on the Georgian Economy: June Update

25 Jun, 2020
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  • Dynamics on international markets indicate relatively short-lived recession
  • Together with the overall improvement, epidemiological situation remains challenging in region countries, leading to the postponing of the border opening. Hence, there is a downward revision of projection of tourism inflows
  • Impact of lower expectations for tourism and FDI inflows, as well as somewhat lower than previously expected budget deficit is balanced by improved expectations on growth of exports and remittances. Overall, in the baseline scenario GDP drop is expected at 4.5-5.5% before recovering by 5.0-6.0% in 2021
  • Shortfall in inflows is expected to widen in coming months, however, sharp depreciation of GEL is unlikely as inflows’ gap is expected to be financed by FX supply from the central bank and government
  • Compared to May 2020 projections, the inflation (from 5.0% to 4.5%) and the refinance rate (from 8.0% to 7.75%) expectations are revised downwards
  • Compared to February, the 11% of formally employed did not receive salary in May, which represents 91,000 person reduction in employment; This number increased by 11,700 since April. Those employed in HORECA and trades industries were hit the hardest
  • Cashless payments exhibit an increasing tendency, however, increasing share of non-cash payments as well as pent-up demand in some sectors might be in play
  • Gradual normalization of residential real estate sales can be observed, the dynamics will be further reinforced by the state support programs. The expected decline of the apartment sales transactions is revised upwards from 30% to 20% YoY
  • Hotel reservations are increasing, mostly on the back of the domestic tourism, however, given the continuous border closure, the expectations for 2020 in this sector are somewhat downgraded
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