Macroeconomic Forecast Georgia

The Georgian general government deficit continued to widen in Q309, reaching GEL608.0mn for the first nine months of 2009, up from a GEL293.3mn deficit over the same period in 2008. This was mainly caused by a 13.5% y-o-y fall in revenues, compared to a milder 6.3% expenditure contraction. Although we expect the fiscal deficit to narrow to 3.3% of GDP in 2010, from an expected 5.4% in 2009, we caution that Georgia is becoming increasingly reliant on foreign borrowing to finance its shortfall, which could have negative implications should borrowing costs rise significantly on the back of increased risk aversion.

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