June 7, 2019 / 8:21 AM / 11 days ago

EBRD sees 4.5% growth in Georgia in 2019, warns on external shocks

TBILISI, June 7 (Reuters) - Georgia’s economy is expected to expand by 4.5% this year, supported by external demand, growing exports and tourism, the European Bank for Reconstruction and Development said.

Georgia’s economy expanded 4.7% in 2018, down from 5% in 2017. The government expects growth this year of at least 5%, driven by tourism, infrastructure, energy, finance and manufacturing. Georgia serves as a transit route for Caspian Sea oil and gas and has a growing tourism sector.

“We forecast Georgia’s real GDP to grow by 4.5% in 2019 and by the same rate in 2020,” Sergei Guriev, the EBRD senior economist, said in emailed answers to Reuters questions.

“External demand is likely to stay main growth driver on the back of continuously expanding exports of goods and a booming hospitality sector.”

Exports benefit from ongoing geographical diversification as free trade agreements grow, Guriev said, and private consumption should remain sound, supported by rising real income, remittances from abroad and strong credit growth.

Georgia was still vulnerable to the slowing global economy and uncertainty arising from trade wars Guriev said. Recession in neighbouring Turkey, one of Georgia’s main trading partners, poses additional challenges, he said.

“The country should continue building resilience and buffers against external shocks,” Guriev said.

“This means continuing to broaden the economic base and diversify exports, maintain sound macroeconomic and financial sector policies, developing local currency and capital markets.”

He said that Georgia should continue to reform the justice system, advance the public sector and ensure independence of economic structures to keep attracting foreign investments.

Georgia’s government expects foreign direct investment to grow by 10% to 15% this year from $1.232 billion in 2018.

EBRD intends to invest $250 million in various projects in Georgia in 2019. (Editing by Larry King)

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