On 10 November 2020 the IMF and Georgia completed a staff-level agreement for the completion of the Seventh Review under the Extended Fund Facility.

The economic shock from the pandemic is projected to cause a contraction of the economy of 5% in GDP in 2020. The current account deficit is expected to widen to 9.7% of GDP in 2020, from 5.4% in 2019. The fiscal deficit is expected to increase as a result of lower tax revenues and measures to support individuals and businesses impacted by the crisis.

The IMF team expects GDP growth to rebound to 4.3% in 2021 as the effects of the pandemic decrease, but considerable downside risks remain. Government measures have helped contain the economic and social impact of the pandemic, but further structural reforms remain essential to limit economic scarring. Uncertainty arises from the regional conflict and the increased number of COVID-19 cases in Georgia.

Medium-term growth is projected to be 5.25% supported by infrastructure spending and sustained structural reforms to increase productivity and enhance private sector-led growth. Tourism receipts are projected to recover to 2019 levels only in 2024. The current account deficit is projected to reach 5.5% of GDP by 2025, financed mainly by foreign direct investment. The government will use all available policy tools to restrict further economic damage if the downside risks lead to further problems for the economy.

Spending has been expanded to minimize the economic and social impact of the crisis. Among the measures taken are wage subsidies, cash transfers to households, expanded social transfers and temporary tax reliefs for business that have helped sustain activity. Efficient implementation of the budget helped accelerate public investment and value added tax (VAT) refunds.

The fiscal deficit is projected to reach 8.7% of GDP in 2020 and 7.6% in 2021. Measures in 2021 to support households and businesses would help solidify the economic recovery in a time of increased uncertainty.

Advancing the structural reform agenda remains essential to support the recovery, facilitating access to finance, advancing educational reform and implementing the corporate insolvency framework to increase Georgia’s competitiveness. The IMF also supports government plans to reform state-owned enterprises to create the conditions for a more efficient public sector and boost private sector development.