In 2023, the Israel-Gaza and Ukraine-Russia conflicts had an impact on the Georgian economy even more than internal factors. In the current year, the country saw a significant decline in economic growth and inflation, apart from that, remittances have almost halved, the lari has gained almost 19% of its year per year.
Commersant offers important economic events of 2023:
Reduced economic growth
In the III quarter of 2023, the gross domestic product (GDP) at current prices stood at GEL 21,248.7 million, compared to the same period of last year, the real gross domestic product grew by 5.7 percent.
Economy grew 8% in the first quarter, 7.8% - in the second.
From double digit inflation to deflation
In November 2023, Georgia’s inflation was -0.2 percent (deflation), the annual inflation stood at 0.1 percent compared to last month hitting the highest low during the year.
In the previous months, the highest inflation of 9.4% was recorded in January but started slowly coming down.
It’s worth mentioning that last year the country had a double-digit inflation.
Record high refinancing rate down 1.5%
On December 20, 2023, the Monetary Policy Committee of the National Bank of Georgia (NBG) decided to reduce the monetary policy rate (refinancing rate) by 0.5 percentage points. Monetary Policy Rate stands at 9.5 percent.
A reduced refinancing rate will lower monthly loan payments for 186,416 borrowers.
At the beginning of the year, the monetary policy rate was 11%, the National Bank slowly started easing the rate in a bid to reduce inflation and risks.
The lari’s strengthening by 18.7%
The lari’s nominal and real effective exchange rates keep on strengthening. Annually in October, the lari’s real effective exchange rate strengthened by 6.3%, the nominal effective exchange rate strengthened by 18.7%.
In October, the average exchange rate of the lari against the US dollar depreciated from 2.6454 to 2.6909 (by 1.7%) compared to the previous month and from 2.8303 to 2.8422 (by 0.4%) against the euro. At the end of the month, the lari’s official exchange rate against the US dollar and the euro was set at 2.7048 and 2.8603 respectively. In October, the maximum USD to GEL exchange rate was set at 2.7058, the minimum - at 2.6675.
In early year, namely in January 2023, the lari’s average exchange rate against the US dollar strengthened from 2.6875 to 2.6763 (by 0.4%) compared to the previous month, and depreciated on average from 2.8428 to 2.8813 (by 1.4%) against the euro.
A 44% decline in remittances
In November, $292.7 million were transferred to Georgia in remittances that is $228 million or 44% less compared to the same period of last year. According to the report published by the National Bank, a decline in remittances is primarily caused by the reduction of money transfers from the Russian Federation.
NBG statistics show that the largest volume of remittances was transferred from the Russian Federation accounting for $75 million in November, although this amount is $ 239 million or 76% less than last year. Instead, money transfers volumes from Italy, USA, Germany and other countries have increased.
A 16.2% increase in foreign trade
In January-October 2023 the external merchandise trade (excluding non-declared trade) of Georgia amounted to USD 17 785.4 million, 16.2 percent higher to the same period of 2022. The exports equaled USD 5 102.3 million (12.5 percent higher), while the imports stood at USD 12 683.1 million (17.8 percent higher).
The negative trade balance was USD 7 580.9 million in January-October 2023 and its share in external trade turnover constituted.
In January-October 2023 the share of the top ten trading partners by exports in the total exports of Georgia amounted to 80.5 percent. The top partners were Azerbaijan (USD 713.5 million), Armenia (USD 657.5 million) and Kazakhstan (USD 579.9 million).
