The European Bank for Reconstruction and Development (EBRD) has cut its 2013 growth forecasts for Georgia’s economy by two percentage points, saying country’s “prospects have worsened relative” to its January forecast.

EBRD predicts Georgia’s economy will grow 3% in 2013, instead of 5% it forecasted in January and well below of the Georgian government's official forecast of 6%.

In its latest Regional Economic Prospects report, covering EBRD’s 34-country operating area in central and eastern Europe, the former Soviet Union and North Africa, Europe's development bank has revised 2013 GDP growth forecast for whole EBRD region down to 2.2%, versus 3.1% forecasted in January. EBRD cited slowdown in growth in Russia, as well other large economies such as Poland and Turkey as a reason behind the downward revision.

On Georgia the report says that country’s economic growth slowed down at the end of 2012, “likely due to lower investment and uncertainty related to post-election political transition.”

“As the external financing package mobilised by a range of donors during the twin crises of 2008 [global financial crisis and war with Russia] has largely been exhausted, the new authorities’ challenge will be to mobilise private sources of financing for supporting investment in key sectors,” the report reads.

“Uncertainty about the external environment has been mitigated by a precautionary arrangement with the IMF. Further normalisation of trade relations with Russia should help support export-led growth over time,” EBRD said.

Georgia’s economic growth slowed to 1.7% year-on-year in the first quarter of 2013, according to preliminary figures released by the state statistics office, Geostat, late last month.

According to preliminary data real GDP grew 2.9% y/y in January, slowing down to 2.1% in February and 0.2% in March.
 
2013 Q1 growth of 1.7% was down from the 2.8% y/y expansion in the last three months of 2012.

President of the National Bank of Georgia, Giorgi Kadagidze, told journalists on May 8 that the central bank was considering revising downward targeted 6% annual growth for 2013.

“Unfortunately, available data does not allow us to suppose that we will be able to have 6% growth by the end of this year,” Kadagidze said. “The reason on the one hand is slowing down foreign direct investment and on the other internal economic factors, I mean business remains passive; the business remains still in wait-and-see mode.”