Georgian Macroeconomic Review. March 2014

Georgian GDP growth rebounded sharply in December, bringing the 4Q13 growth to a healthy 6.9% yoy and full 2013 growth to 3.2% yoy. January also came in like a lion at 7.8%, a sign the economy is already picking up a head of steam even though we had expected this no earlier than the 2Q. We believe the acceleration is mainly a result of a spike in budget spending towards the end of the year – current government expenses surged +19% yoy in the 4Q13, up from an 11% decline in the 3Q13. The bulk of the spending was directed to households in the form of social payments and public employee salaries, which helped lift private demand. Generous social outlays should help keep private demand robust in the coming months but the base effect will come into play towards the end of the year. A growth model based mainly on social payments can only be sustained for a limited time, and Georgia needs to strengthen other growth pillars like exports and investments.

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