Georgia: 1H23 growth performance in line with our more constructive outlook for the year

CAUCASUS / CENTRAL ASIA - In Brief 31 Jul 2023 by Ivan Tchakarov
The Statistical Office reported today that the rapid estimate of economic growth expanded by 7.7 percent YoY in June. The monthly indicator is calculated using administrative data on VAT taxpayers’ turnover, fiscal and monetary statistics. For those sectors, where preliminary monthly data do not exist, including agriculture, non-observed economy etc., estimates are based on the data for previous periods. The June estimate is slightly up on the May and Apr prints, which were reported at 7.0 percent YoY and 7.5 percent YoY, respectively. Therefore, the available data so far in 2Q23 justifies our recent upgrade of 2023 GDP growth. First quarter GDP growth moderated to 7.7 percent YoY from 9.7 percent YoY in 4Q22. The key drivers of economic performance were net exports of services (chiefly tourism) and gross capital formation, while net exports of goods and consumption subtracted from growth. There are already some signs that the contribution from tourism may have peaked in the third quarter of last year as the net export of services added 6.5 percent to 1Q23 GDP growth, down from 14.2 percent in 3Q22. At the same time, the flow of net monetary transfers from abroad, including from Russia, appears to be exhibiting a higher degree of stickiness relative to Armenia and Azerbaijan, which should provide a useful support to growth.The preliminary estimate of 2Q23, calculated from the monthly output indicators, has come in at 7.4 percent YoY, pointing to a very modest deceleration in the pace of economic activity. 1H23 GDP growth is, therefore, running strong at 7.6 percent YoY, supporting our upgraded 6.0 percent GDP forecast for the year.

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