December 15, 2017 / 1:14 PM / a year ago

Georgia passes 2018 budget, expects GDP to rise 4.5 percent next year

TBILISI (Reuters) - Georgia expects state revenues and spending to rise next year and forecasts 4.5 percent economic growth in the budget passed by the parliament on Friday.

The former Soviet republic, through which pipelines carry Caspian oil and gas to Europe, is recovering from a decline in exports and a plunge in the currencies of its main trading partners, which have depressed economic growth in recent years.

But the situation started to improve this year and the economy expanded by 4.9 percent year-on-year in the first 10 months of 2017, up from 2.5 percent in the same period of 2016.

Georgia’s economy expanded by 2.2 percent last year and the government in Tbilisi expects it to grow 4.5 percent this year, helped by private-sector development, higher exports and remittances from abroad as well as government spending on infrastructure projects.

The International Monetary Fund said in October that it now expected Georgia’s economy to grow 4.3 percent this year, up from a previous forecast of 3.5 percent and 4.2 percent in 2018, against 4.0 percent previously.

The 2018 budget sees revenues at 12.44 billion lari ($4.98 billion), around 1 billion lari up from total revenues anticipated this year, and spending at 12.45 billion lari, 739 million lari up from 2017 year’s projections.

The document sees annual inflation at 3.5 percent next year. Consumer prices rose 6.9 percent in annual terms in November. The central bank, which raised its key interest rate to 7.25 percent from 7 percent this week, citing forecasts suggesting that annual inflation would overshoot the bank’s 4 percent target this year, said it expected inflation to return to the targeted level in 2018.

The budget is calculated on a rate of 2.5 lari per dollar.

Opposition lawmakers criticized the budget, saying it would not help resolve social and economic problems in Georgia including high unemployment and low wages.

Reporting by Margarita Antidze; editing by Jeremy Gaunt

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