Macro-Sectoral Overview

30 Mar, 2021

COVID-19 Spread Dynamics and Tourism Expectations

  • Still high uncertainty about the vaccination process; Also, the risk of the third wave has increased
  • According to the baseline scenario, 25% of 2019 tourism inflows will be recovered in 2021, while in 2022 the figure will reach 90%


Key Macro Parameters

  • Non-tourism revenues showed resilience in 2020, especially if adjusted for one-off in Q4 FDI inflows
  • 2021 outlook slightly down, however, 2022 still a restart year
  • The recovery dynamics of trading partner countries, along with the virus containment, are largely in line with the TBC Capital growth forecast
  • Still sizable government financing in 2021
  • GEL real effective and bilateral exchange rates remain depreciated
  • The odds of stronger dollar are higher, however, dollar is already strong and pro-cyclical
  • Compared to our last forecast, the GEL/USD exchange rate expectations are slightly worsened. Our expectation for GEL/USD exchange rate is in the 3.2-3.5 range
  • CPI inflation is forecasted to increase by 6.0-7.0% by the end of 2021
  • The probability of further tightening the monetary policy is increased, however, it is worth considering that interest rate differential between FX and GEL is record high


Business Sectors

  • Recovery continues in most affected sectors globally along with the vaccination process
  • In the baseline scenario, majority of sectors will recover to pre-crises levels by 2022
  • In the hotel industry slight improvement is noticeable as international flights start to return gradually
  • Rate of decline is moderating in Tbilisi and Batumi residential real estate sales in the beginning of 2021. Return to 2019 levels in the sector is expected by 2022
  • Consumer cyclical sector sales were heavily affected during lockdowns, however, more active e-commerce sales have somewhat cushioned the negative impact in selected sub-sectors. Sales of electronics and furniture is expected to rebound to pre-crises levels already in 2021 while recovery in textile sector is set to take longer
  • Drop in commercial real estate revenues in 2020 is mostly explained by lower rental rates, while occupancy rates remained relatively stable. Office and retail spaces are projected to show weaker growth over the longer term in light of long term risks emerging from shifting in consumer behavior
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