Georgia’s economy grew by 7.7% y/y in Feb-25
Georgia’s economy grew by 7.7% y/y in Feb-25, after a 11.1% y/y growth in previous month. Cumulatively, real GDP growth came in at 9.4% y/y in 2M25. This growth was mainly driven by increased activity in the professional & scientific, ICT, transport, energy and mining sectors, while the manufacturing and construction sectors contracted.
Given the stronger-than-expected growth in 2M25, we raised our baseline real GDP growth forecast to 6.8% from previous projection of 5.0% for 2025 (see latest macro forecasts here).
Annual inflation was 3.5% in Mar-25
In Mar-25, annual inflation in Georgia rose to 3.5% y/y, up from 2.4% y/y in the previous month. This increase was mainly driven by a further rise in domestic inflation to 4.0% y/y in Mar-25 (up from 3.0% y/y in Feb-25), along with a 5.7% y/y rise in mixed goods inflation (up from 3.1% y/y in Feb-25). Meanwhile, imported inflation was just 0.2% y/y in March (down from 0.5% y/y in Feb-25). Notably, core inflation, excluding volatile food, energy and tobacco prices, increased to 2.4% y/y in Mar-25, following a 2.0% posted in previous month.
By categories, annual inflation in Mar-25 was largely driven by price increases in food and non-alcoholic beverages (+6.6% y/y, +2.20ppts), healthcare (+8.8% y/y, +0.74ppts), alcoholic beverages & tobacco (+4.2% y/y, +0.28ppts), education (+4.9% y/y, +0.25ppts) and hotels & restaurants (+6.6% y/y, +0.22ppts) categories. In contrast, as in the previous month, the communication category recorded a deflation of -12.4% y/y (contributing -0.46ppts to overall inflation), followed by furnishings, household equipment and maintenance (-2.1% y/y, -0.12ppts) in Mar-25.
On a monthly basis, there was a 1.1% y/y inflation in Mar-25, mainly due to rising prices in food and non-alcoholic beverages (+2.8% m/m, +0.93ppts) and healthcare (+1.7% m/m, +0.15ppts) categories.
We forecast average annual inflation at 3.7% in 2025.
CA deficit narrowed to 4.4% of GDP in 2024
Current account (CA) deficit reduced by 12.7% y/y to US$ 1.5bn or 4.4% of GDP in 2024, down from 5.6% posted in 2023. This improvement was supported by a strong positive balance in services (+12.3% y/y), particularly driven by tourism (+7.3% y/y) and transport services (+16.1% y/y), along with a 10.1% y/y decrease in the negative income balance. Meanwhile, goods trade deficit increased by 6.6% y/y, reaching US$ 6.5bn, as goods exports increased by 6.1% y/y and goods imports were up by 6.3% y/y in the same period. Net FDI amounting to US$ 905.9mn (-43.9% y/y), covered only 60.7% of the CA deficit in 2024. Notably, excluding reinvestments (recorded in both CA and its funding categories), CA deficit stood at 1.0% in 2024 (it was 0.4% of GDP in 2023).
We forecast CA deficit at 5.2% of GDP in 2025.
