As the Asian Development Bank's report says, the regional economy will observe about 60 – 279 billion USD loss due to ongoing pandemic.
It estimates three possible scenarios: soft, average, and hard.
The scenarios include the world economy loss from 77 billion USD to 374 billion USD, i.e., the entire GDP growth will decrease from 0.1 to 0.4 percent.
Director of the ADB Georgia Office Shane Rosenthal says that the poor people are most affected.
Under the report, growth in the subregion will drop to 2.8% in 2020 as economies falter worldwide and drag down global commodity prices.
As the report reads, Georgia's highly tourism- and the trade-dependent economy will be particularly vulnerable to COVID-19 as closed borders and monetary tightening grind growth to a halt in 2020.
It says subregional inflation at 7.6% this year will be little changed as mixed projections balance out. Monetary tightening is expected to lower inflation in Georgia and Uzbekistan both years and in Kazakhstan in 2021.
In Georgia, COVID-19 and monetary tightening are projected to slow growth to zero this year, picking up to 4.5% in 2021. Monetary tightening is also proposed to trim inflation in Georgia from 4.9% in 2019 to 4.5% this year and 3.0% in 2021.
''To cope with rising inflationary pressures and currency depreciation due to the strengthening of the US dollar and lower than expected foreign exchange inflows, the National Bank of Georgia, the central bank, raised its policy rate by 250 basis points to 9.0% in four steps in the period from September to mid-December 2019 and maintained the rate in the first quarter of 2020, while cutting reserve requirements on deposits denominated in foreign currency by 5 percentage points to 25% in October 2019. The lari depreciated in 2019 by 8.9% against the US dollar, 6.2% against the euro, 4.9% in nominal effective terms, and 5.3% in real effective terms. The currency lost further ground in the first quarter of 2020 due to the global rise of the US dollar and risk premium that the market is perceiving amid the global COVID-19 outbreak. In response, the central bank sold foreign exchange in the amount of $193 million in the period from August 2019 to March 2020,'' the report reads.
''Georgia's external prospects will depend heavily on developments in its trading partners. The current account deficit is projected to narrow further, to 4.4% of GDP in 2020 and 4.2% in 2021, with a continued decline in imports as much lower oil prices help trim the trade deficit by 2.5% in 2020 and 0.5% in 2021. Exports are projected to grow by 3.6% in 2020 and 11.9% in 2021, with modest domestic expansion and higher foreign direct investment raising imports by 1.1% in 2020 and 7.0% in 2021. Gross international reserves are expected to reach $3.5 billion in 2020 and $3.6 billion at the end of 2021. External debt is expected to equal 96.0% of GDP at the end of 2020 and 96.5% at the end of 2021,'' the report says.
See the full report here.
Bela Gelashvili
News Author