TOPIC OF THE WEEK: Economic cycle to serve the new Georgian government well in the run-up to the Oct elections

CAUCASUS / CENTRAL ASIA - Report 16 Feb 2024 by Ivan Tchakarov

As the new government led by Irakli Kobahidze starts its term, prospects for the economy look bright, with Georgia gearing up for the October parliamentary elections. The strong economic momentum continues, with 2023 GDP growth upgraded to 7.5 percent from 7.0 percent previously. We forecast 2024 GDP growth at 5.5 percent, which is in line with government estimates.

Inflation has also behaved better than anticipated, having averaged only 2.6 percent in 2023, i.e., below the CPI target of 3.0 percent. The moderating pace of economic activity, lower global commodity prices and still tight monetary policy do create a favorable backdrop for price growth to continue evolving around the CPI target this year. Real wages have benefited from subdued price pressures and are currently expanding at their strongest pace in a decade.

As a result, Georgian Dream appears well positioned to capitalize both on the strong economy and the failure of opposition to present a united front to challenge the ruling party. In fact, given the new procedure by which the president will be elected this year, in line with the 2018 Constitutional amendments, Georgian Dream may finish the year winning a constitutional majority in Parliament and having a president who is much more closely aligned with its own priorities.

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