February 5, 2015 / 1:32 PM / 3 years ago

UPDATE 1-Georgia may cut 2015 economic growth forecast

(Adds quotes, details, background)

By Margarita Antidze

TBILISI, Feb 5 (Reuters) - Economic growth in the former Soviet republic of Georgia should exceed 4 percent this year, its finance minister said on Thursday, indicating it will miss an official forecast of 5 percent.

Like a number of other former Soviet states, Georgia’s economy and its currency are suffering from the side-effects of a plunge in the Russian rouble and the Ukraine crisis. Russia is its third-biggest trade partner.

“We project that economic growth this year will exceed 4 percent,” Finance Minister Nodar Khaduri told a government meeting. The economy grew 4.7 percent in 2014.

He said the government had not yet revised its growth forecast but officials were working on “specifying projections for this year.”

“The current situation is so complicated that it’s impossible to make an exact forecast,” Khaduri told reporters after the government meeting.

Georgia’s Economic Development Minister said the government would be able to make more precise projections by the end of the first quarter.

“Processes in the region are quite complicated and it affects Georgia’s economy, of course,” Georgy Kvirikashvili told reporters.

The central bank said last week that it is likely to cut its economic growth forecast for this year from 5 percent.

The bank said on Friday that it would tighten monetary policy this week -- even though its next scheduled policy meeting is not until Feb. 11 -- in an effort to maintain financial stability after a sharp fall in the value of the lari currency. It has yet to announce the policy change or what form it will take.

The central bank has kept its main refinancing rate at 4 percent since March 2014.

The lari was trading at 2.10 per dollar on Thursday, compared to 1.7542 at the start of November.

Russia reopened its market to Georgian wine, mineral water and fruit in 2013 after imposing a ban in 2006, but relations between the two countries are still tense following their 2008 war over two Moscow-backed breakaway regions.

Georgian exports fell by 2 percent in 2014 to $2.9 billion, while imports rose 7 percent to $8.6 billion and its trade deficit rose by 15.5 percent to $5.7 billion.

Falling exports and foreign investment are pushing up the government’s budget deficit, which stood at around 3 percent of GDP at the end of 2014. (Writing by Margarita Antidze; Editing by Susan Fenton)

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