Macroeconomic Forecast Georgia

Georgia's foreign exchange reserves hit a record US$1.22bn at the end of June, 12.6% of forecast 2007 GDP. In line with this latest figure, we have revised upward our 2007 end-year reserve forecast to US$1.45bn, a 34.3% y-o-y increase from end-2006. We have also raised our forecasts over the long term, with reserves now expected to hit US$2.58bn by the end of 2011. Georgia's reserves have been building in spite of a double-digit current account deficit, which came in at 22.9% of GDP in Q107. Large inflows of foreign direct investment, which were US$1.1bn (net) in 2006, are expected to

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