Georgia: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Georgia

2024ARTICLE IV CONSULTATION—PRESS RELEASE;STAFF REPORT;AND STATEMENT BY THE EXECUTIVEDIRECTOR FORGEORGIA Under Article IV of the IMF’s Articles of Agreement, the IMF holdsbilateral discussionswith members, usually every year. In the context of the2024Article IV consultation withGeorgia, the following documents have been released and are included in this package: •APress Releasesummarizing the views of the Executive Board as expressed during itsMay 13, 2024consideration of the staff report that concluded the Article IVconsultation withGeorgia. •TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onMay 13, 2024, following discussions that ended onMarch 18, 2024,with the officials of Georgiaon economic developments and policies. Based oninformation available at the time of these discussions, the staff report was completedonApril 29, 2024. •AnInformational Annexprepared by the IMFstaff. •AStatement by the Executive DirectorforGeorgia. The documents listed belowwill be separately released. Selected Issues TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staff reports andother documents. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. IMF Executive Board Concludes 2024 Article IV Consultation withGeorgia FOR IMMEDIATE RELEASE Washington, DC–May 13, 2024:The Executive Board of the International Monetary Fund (IMF)concluded the Article IV consultation with Georgia.1 Financial inflows triggered by Russia’s war in Ukraine continue to moderate but remain above pre-war levels, supporting a positive macroeconomic outlook. In 2024, growth is expected to ease butremain above trend, inflation is expected to pick-up as monetary policy continues to normalize, andthe current account deficit is expected to widen from historic lows. Over the medium term, growthwould converge to its potential rate of 5 percent, inflation to the National Bank of Georgia’s (NBG) 3percent target, and the current account deficit to 5.5 percent of GDP, supported by continuedimprovements in services exports. Risks to the outlook are tilted to the downside. A reversal of war-related migrant and financial inflowsand intensification of sanctions that affect Georgia and geo-economic fragmentation remain keydownside risks. Replenished fiscal and reserve buffers, as well as abundant bank capital and FXliquidity would mitigate such risks. A loss of reform momentum before the October Parliamentaryelections and growing concerns about governance also pose downside risks. On the upside, EUcandidate status could send a positive signal, including for investments, if reforms gain impetus tomove the accession process forward. The authorities have pursued prudent policies to secure macroeconomic and financial stability. TheNBG has maintained a tight monetary policy stance, normalizing the policyrate gradually, whileusing macroprudential measures to address systemic risks. Despite significantforeign exchangepurchases, reservesfell below the IMF’sadequacymetric. There remain gaps in the NBG Lawregarding NBG governance and independence. Adequate buffers have been maintained under thefiscal rules and good progress has been achieved in evaluating tax expenditures and strengtheningpublic investment management. Progress has been slow on developing a Medium-Term RevenueStrategy to build space for spending priorities and reforming the SOEs to limit their fiscal risks. The authorities have taken significant steps to address entrenched high unemployment and diversifythe economy, including by pursuing trade agreements and infrastructure investments. Challengesremain in improving the quality of education and productivity, particularly in the agricultural sector, aswell as in bolstering the judicial system and the anti-corruption authority to strengthen governance. Executive BoardAssessment2 Executive Directors agreed with the thrust of the staff appraisal. They welcomed Georgia’s resiliencein the face of multiple shocks. While noting the continued strong macroeconomic performance,Directors highlighted that the global environment is highly uncertain and that the outlook is subject tosignificant downside risks. They called for continued prudent policies to strengthen resilience andstructural reforms to boost potential growth, support more inclusive, job rich growth, and ensureprogress toward EU accession. Directors underscored the importance of continued Fundengagement to support these goals. Directors supported the authorities’ plans for continued modest medium term fiscal adjustment toensure sufficient buffers under thefiscal rule, while creating room for social and infrastructurespendin