Georgia’s economy grew by 7.5% y/y in May-25
Georgia’s economic growth was 7.5% y/y in May-25, maintaining the same growth rate as in April. Cumulatively, real GDP growth reached 8.8% y/y in 5M25. The May performance was mainly driven by increased activity in the ICT, manufacturing, trade, transport and storage, and construction sectors, while the energy sector posted a decline. Reflecting the upward revision to 1Q25 GDP data, we have raised our full-year 2025 real GDP growth forecast to 7.5%, up from the previous forecast of 6.8% (see latest macro forecasts here).
Annual inflation hits 4.0% in Jun-25
In Jun-25, Georgia’s annual inflation accelerate to 4.0%, up from 3.5% posted in previous month. The increase was mainly driven by domestic inflation, which rose to 5.2% y/y (May-25: 4.9%), and by mixed-goods inflation, which surged to 7.2% y/y (May-25: 5.8%). In contrast, imported goods continued to post deflation at -2.0% y/y, helping contain the overall inflation rate. Core inflation, excluding food, energy and tobacco, edged up slightly to 2.2% y/y from 2.0% y/y in the previous month.
By categories, annual inflation in Jun-25 was largely driven by price increases in food and non-alcoholic beverages (+10.1% y/y, +3.34ppts), healthcare (+9.4% y/y, +0.79ppts), alcoholic beverages & tobacco (+4.6% y/y, +0.30ppts), education (+4.6% y/y, +0.24ppts) and hotels & restaurants (+6.0% y/y, +0.19ppts) categories. Meanwhile, deflation was observed in the transport (-5.3% y/y, -0.64 ppts) and communication (-13.0% y/y, -0.48 ppts) sectors.
On a monthly basis, inflation was flat in Jun-25, as a price increase in alcoholic beverages and tobacco (+2.2% m/m, +0.14ppts) was offset by a decline prices of food and non-alcoholic beverages (-0.4% m/m, -0.15ppts).
We forecast average annual inflation at 3.7% in 2025.
CA deficit was 8.5% of GDP in 1Q25
The Current Account (CA) deficit widened to 8.5% of GDP in 1Q25, mainly due to a one-off import of paintings/drawings valued at US$ 481mn. Excluding this extraordinary item, the underlying deficit narrows to just 2.3% of GDP, a notable improvement from 4.4% in 1Q24.
In 1Q25, merchandize trade deficit – traditionally the major driver of the CA deficit – increased by 15.1% y/y to US$ 1.7bn, as exports grew by 5.5% y/y and imports rose by 10.0% y/y (including the one-off imports). The negative impact of the trade balance was partially offset by a sharp rise in the services surplus, which expanded by 15.8% y/y to US$ 780.3mn. This growth was led by a strong increase in revenues from ICT services (+57.3% y/y to US$ 300mn), followed by transport (+4.4% y/y to US$ 386.3mn) and tourism (+2.3% y/y to US$ 826.0mn). Meanwhile, the transfers balance stood at US$ 843.3mn (-3.6% y/y), while the negative income balance widened to US$ 537.5mn (+52.8% y/y) in 1Q25.
We project CA deficit at 5.0% of GDP in 2025, up from 4.5% of GDP in 2024.
