TBILISI, Georgia — TBC Capital has revised upward its 2026 economic growth forecast for Georgia, increasing it from 6.1% to 7.4%, citing stronger-than-expected export dynamics that are offsetting tourism losses and higher oil import costs.
According to preliminary data from Geostat, Georgia’s economy expanded by 9.1% year-on-year in the first quarter of 2026, including a robust 10.7% growth in March. Similar to February, the March estimate exceeded expectations.
Two months after the escalation of the Middle East conflict, TBC Capital notes that while the negative impact on the hospitality sector remains significant, its overall macroeconomic effect has been relatively contained. In contrast, exports—particularly of commodities—have accelerated, supported in part by rising global prices. Unlike previous years, exports are now emerging as the primary driver of economic growth, as recent non-cash spending indicators show no substantial acceleration in domestic consumption.
TBC Capital had already highlighted the improving export outlook in its March publication, though actual inflows have surpassed expectations.
Georgia’s economy continues to demonstrate a degree of structural resilience. While the country remains sensitive to external shocks, offsetting factors help balance risks across many—though not all—scenarios. For example, despite being a net importer of oil products, Georgia benefits from relatively strong foreign currency inflows from oil-producing countries, which partially mitigates external vulnerabilities.
In addition, oil re-exports have increased significantly since November of last year, accounting for 16.5% of total exports as of March, although this is likely a temporary trend.
Historically stable export-import price dynamics have also played a role. In March, export prices rose by 3% month-on-month, driven by global price increases in key commodities such as oil, gold, copper, ferroalloys, and fertilizers. This fully offset a 2.9% rise in import prices linked to higher oil costs.
At the same time, stable terms of trade still imply a deterioration in the trade balance in U.S. dollar terms, as import volumes significantly exceed exports. However, export volumes have also increased, leading to a reduction in the trade deficit-to-GDP ratio in the first quarter compared to previous years.
Overall, TBC Capital estimates that tourism losses in March—relative to a no-conflict scenario—amounted to approximately $75 million. In contrast, export growth accelerated by around $90 million compared to February. A similar trend is expected to continue in April, with data to be released later.
While price normalization remains the base-case scenario—likely leading to a moderation in export revenues—this is expected to be accompanied by a recovery in tourism.
Three key factors continue to shape the outlook: the reduced likelihood of a near-term end to the war in Ukraine, the ongoing impact of the Middle East conflict, and stronger-than-expected economic growth data from Geostat. The combined effect of these factors has intensified.
TBC Capital has also revised its inflation forecast upward, from 5.6% to 6.0% by year-end. This adjustment reflects slightly higher-than-expected April inflation (5.9%) and renewed increases in oil prices following a brief period of moderation in mid-April.
Seasonally adjusted annualized inflation surged to 21% in April—the highest level since 2022—primarily driven by increases in electricity tariffs and fuel prices (gasoline and diesel). Together, these factors contributed 1.4 percentage points to annual inflation. Conversely, as base effects fade, the contribution of bread prices has declined to 0.5 percentage points in April, down from 0.9 percentage points in February.
Looking ahead, TBC Capital expects the National Bank of Georgia to maintain its monetary policy rate at 8% throughout the year.
Regarding the Georgian lari (GEL), the company notes that rising inflationary pressures—even under a scenario of relatively rapid conflict resolution—may support short-term currency appreciation. However, a slight deterioration in the external balance is expected on an annual basis. As a result, under the baseline scenario, the lari is projected to remain broadly stable around current levels.
The full report is available at.
