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IMF says Georgia's economic growth in 2018 may be better than projected

TBILISI, March 16 (Reuters) - Georgia's economic growth in 2018 may be better than the 4.2 percent projected by the International Monetary Fund (IMF) if domestic consumption is stronger and the external environment more supportive than expected, an IMF official said.

The IMF in October raised its forecast for the former Soviet republic's economic growth in 2018 to 4.2 percent from 4.0 percent.

"We are still projecting growth of 4.2 percent in 2018. That said, there is upside risk to this projection arising from stronger domestic demand and a more supportive external environment," Francois Painchaud, the IMF representative in Georgia, said in e-mailed answers to questions from Reuters.

Georgia, a major conduit for carrying Caspian oil and gas to Europe, is recovering from falling exports and a plunge in the currencies of its main trading partners Russia, Turkey and Azerbaijan, which depressed economic growth in recent years.

The economy expanded by 4.8 percent year-on-year in 2017, up from 2.2 percent in 2016, thanks to higher exports and remittances from abroad. The highest growth was in the food processing industry, services and real estate operations.

The government in Tbilisi expects 4.5 percent economic growth in 2018.

Painchaud said the IMF expected robust quarter-over-quarter growth in 2018, although annual growth this year still be lower than in 2017. The Fund expected Georgia to continue fiscal consolidation this year after the country managed to demonstrate better-than-expected fiscal performance in 2017.

"Preliminary data indicates that the augmented fiscal deficit in 2017 was 2.9 percent, 1/2 percentage points better than expected under the (IMF) program," Painchaud said.

"This reflected robust revenues and the ability of the government to contain current spending ... creating space to increase public investment by 2 percentage points of GDP."

Painchaud said the fund considered the central bank's monetary policy as appropriate to reach the annual inflation target of 3 percent by the end of 2018.

Georgia's central bank kept its key refinancing rate unchanged at 7.25 percent on March 14, following the same move in January, citing forecasts suggesting that annual inflation would stay close to its 3 percent target this year.

Annual consumer prices rose 2.7 percent in February.

The IMF approved a $42.2 million tranche disbursement to Georgia in December under a three-year $285 million loan program. Successful completion of the next review under the arrangement in April will enable the release of about $43 million. (Editing by Peter Graff)