TBILISI, Dec 14 (Reuters) - Georgia expects state revenues and spending to rise next year amid tax reform and forecasts 4 percent economic growth in the budget passed by the parliament on Wednesday.
Growth slowed in the former Soviet republic to 1.3 percent year-on-year in October from 1.5 percent in September. The economy has been hit by a plunge in the Russian rouble, a drop in remittances from overseas, and falling exports.
Georgia’s growth forecast for 2017 matches that of the International Monetary Fund (IMF), which has trimmed its projection from an earlier 5.2 percent.
The government cut its growth forecast for 2016 to 2.7 percent from 3 percent on Wednesday in a draft budget amendment submitted to parliament, highlighting the impact of dwindling exports and an expanding current account deficit.
The 2017 budget sees revenues at 9.489 billion lari ($3.796 billion), up from 8.546 billion lari anticipated this year, and spending at 9.121 billion lari, down from 8.671 billion lari projected in 2016.
The document calls for 8.82 billion lari in tax revenues in 2017, 84 million lari above this year’s target.
Georgia estimates revenues from corporate profit tax will decline to 681 million lari from this year’s target of 980 million lari due to corporate tax reform.
Georgia will stop taxing corporate profits from Jan. 1, 2017 and plans to tax dividends instead to spur private investment.
The IMF is sceptical about the reform and projects that it might knock 1.5 percent off Georgian GDP growth next year.
Coverage of the expected gap is envisaged by increases in other taxes, particularly excise levies on tobacco, cars and oil products from Jan. 1, 2017.
Opposition lawmakers criticised the budget, saying it would not help resolve social and economic problems in Georgia including the lari’s sharp depreciation, high unemployment and low wages.
“People want taxes to decline, pensions to rise and this budget does not correspond with these demands from the society,” Sergi Kapanadze, an opposition MP, said. “This budget won’t serve as a base for fast economic development.”
The budget is calculated on a rate of 2.5 laris per dollar. The lari’s official rate hit an all-time low of 2.6604 to the dollar on Wednesday, down from 2.6599 on Tuesday. (Reporting by Margarita Antidze; editing by Mark Heinrich)