Is Georgia's economy on the rise?

The National Bank of Georgia increased its forecast for GDP growth in the country in 2016 from 3% to 3.5%, the President of the National Bank, Koba Gvenetadze, said at today's briefing.

"The difficulties experienced by the country's major trading partners continue to hamper Georgia's economic growth, but internal and external investors have intensified their activity. Due to this the National Bank expects the GDP to grow by 3.5% this year," Sputnik-Georgia cited Gvenetadze as saying.

The President of the Georgian National Bank also noted the improvement of the situation in the construction industry, as well as a positive impact of the free trade regime with the EU countries on the country's economy. In addition, planned fiscal stimulus measures and improving the investment environment have also improved the outlook, and provide prospects for growth in investment and consumption. A positive effect from the reduction of the refinancing rate is also expected, Koba Gvenetadze stressed.

The international financial institutions also give optimistic forecast for the development of the Georgian economy: for example, according to the IMF, the Georgian economic growth will be 2.5% this year, while the EBRD predicts economic growth of 3.4%.

According to the National Statistics Office of Georgia 'Geostat', the real economic growth in Georgia was 2.9% in January-May 2016 in comparison to the same period last year.

The head of the Center for Global Studies, Nana Devdariani, speaking with a correspondent of Vestnik Kavkaza, said that a number of factors could affect the forecast. "It is affected by the seasonal factor – the fact that today there are many tourists, and, of course, revenues are relatively growing," she said, adding that he, and the depreciation of the lari could play its role.

According to Devdariani, we should remember that the Parliamentary elections will be held in a few months. "And of course, reports about GDP growth before elections are always beneficial for the ruling forces," the head of the Center for Global Studies said.

She added that investments from Russia provide strong support for Georgia's economy. "With regard to direct investments in the Georgian economy, then, paradoxically, despite the lack of diplomatic relations between Moscow and Tbilisi, there have been more direct investments from Russia in recent years, with the exception of direct aid from the EU and the US. And during Saakashvili's rule strategic assets were given to Russian business groups or groups associated with Russia. These factors must always be taken into account," Nana Devdariani concluded.

The head of the Institute of Management Strategy, Petre Mamradze, said that a key role is played by increased investment. "The first half of this year was a record one. There was no such investment growth since the first half of 2008. There is progress in agriculture as well," the expert explained.

 However, he noted that in the first place, the National Bank's forecast gives hope for the future. "The situation remains very difficult. The export-import imbalance is catastrophic. There was no progress in the first six months of this year. The authorities say that a lot of companies opened, but in fact we see rising imports and declining exports. 80% of food produce consumed by Georgia is imported from abroad," the head of the Institute of Management Strategy complained.

One of the reasons for this situation is due to close interactions with the European Union. "Yes, the policy of rapprochement with the EU is very positive and promising. But in this context, we received a negative balance," Mamradze said.

"The citizens of Georgia, who work mostly in Russia, send remittances. Thus, Georgia receives about $2 billion, which is more than investments," he noted.

"I am very optimistic, because, in fact, investments increased this year, but this is just an optimistic assessment of the future," Petre Mamradze concluded.