Georgia economy seen staying resilient as IMF urges tighter policy on inflation

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Highlights

Georgia's real GDP grew 7.4% year on year in January–September 2026, with the IMF projecting moderation to 7.2% in 2026 and 5.7% in 2027.
Inflation reached 5.9% year on year in October 2026, prompting the National Bank of Georgia to maintain its policy rate at 8.25% amid IMF calls for a potentially tighter stance.
Georgia's current account deficit narrowed to 2.5% of GDP in H1 2026 while gross international reserves hit a record $8.2 billion at October's end, strengthening external buffers.

IMF mission findings and policy stance

As reported by the International Monetary Fund, an IMF staff team led by Alejandro Hajdenberg concludes a visit to Tbilisi after meetings from November 9 to 13 and says Georgia’s economy remains robust despite external shocks.

Real GDP grows 7.4% year on year in January through September 2026, supported by information and communication technology, transport and trade, although activity moderates in recent months. After growth of 7.5% in 2025, the IMF projects expansion of 7.2% in 2026 and 5.7% in 2027, before gradually converging toward a medium-term rate of about 5%.

Inflation stays above the National Bank of Georgia’s 3% target, reaching 5.9% year on year in October 2026. The IMF says higher energy prices linked to the war in the Middle East remain an important driver, while broader price pressures are also building, with core inflation at 4.0% and services inflation still elevated.

The National Bank of Georgia raised its policy rate in May and keeps it at 8.25%. IMF staff says a tighter monetary stance may be needed if inflation remains more persistent than expected, with policymakers watching second-round effects and inflation expectations.

External buffers, fiscal risks and reform priorities

Georgia’s external position strengthens further, with the current account deficit narrowing to 2.5% of GDP in the first half of 2026. Gross international reserves rise to a record U.S.$8.2 billion at the end of October as the central bank continues foreign-exchange purchases amid financial inflows and a smaller external gap.

The IMF says the outlook remains uncertain. Risks include a renewed escalation of the war in the Middle East, which could push up energy and food prices and disrupt tourism, as well as domestic political tensions and strained relations with the European Union that could weaken investor sentiment.

On fiscal policy, the fund says the deficit is projected at about 1.5% of GDP in 2026 and public debt at roughly 33% of GDP. The draft 2027 budget targets a deficit of 2.5% of GDP with higher social spending, public wages and capital investment, while the IMF says any support measures for energy costs should be targeted to vulnerable households and avoid broad distortions.

The IMF also points to further reform priorities in central bank governance, state-owned enterprises and labor market productivity. It says Georgia’s banking sector remains sound, but continued monitoring of dollarization and foreign-currency lending is warranted, while stronger skills matching, vocational education and private investment would help make growth more inclusive and durable.

Previously, we outlined the main factors behind the Georgia Fund 1 rating affirmation by Fitch for its top-tier money market fund grade.

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