Macroeconomic Forecast Georgia

BMI View: GDP growth remains robust - measuring 8.4% year-on-year (y-o-y) in H106 - despite the Russian embargo on wine and mineral water damaging the external position. Large capital inflows linked to rapid financial deepening, alongside strong privatisation activity, are supporting the economic expansion, which we expect to measure 8.1% by end-2006. Over the remaining forecast period, annual GDP growth should moderate, reaching 6.7% and 5.4% in 2007-2008. The main risk to our forecasts remains the drag of a widening trade balance, which will require a re-opening of the Russian export market if it is to be contained.

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