Page 26 - GEORptDec21

Georgia’s current account deficit reduced to 8% of GDP in 2Q21
Georgia’s current account gap keeps exchange rate under pressure in H1
Exports increased by 24% y/y, reaching $2.98bn, while imports grew by 21.6%, to $7.03bn. Meanwhile, the trade deficit stood at $4.05bn, constituting 40.4% of the trade turnover in January-September.
The current account deficit reduced by 8.4% y/y to 8.0% of GDP in 2Q21, down from 11.8% of GDP in 2Q20, according to NBG. The improvement in the CA balance was supported by a surge in transfers, up 58.7% y/y to $537.9mn (11.2% of GDP), followed by a recovery in service balance (reflecting the rebound in tourism revenues), up 26.4x y/y to $143.9mn.
Meanwhile, merchandise trade deficit, traditionally the major contributor to deficit creation, widened by 23.3% y/y to $755.6mn, as exports increased by 49.0% y/y and imports by 42.9% y/y. Notably, other investments at $318.2mn (6.7% of GDP) were key funding source of CA deficit, while net FDI stood at $148.0mn (3.1% of GDP) in 2Q21.
Overall, the CA deficit came in at 9.2% of GDP in 1H21, down from 11.3% of GDP in 1H20.
The current account deficit of Georgia narrowed by 8.8% y/y to $381mn in Q2 and by 9.7% y/y to $747mn in H1, the National Bank of Georgia has announced. The change reversed only a small part of the 2.7-fold deterioration seen in the COVID-19-hit Q2 last year, when the country’s tourism revenues evaporated overnight, to only slightly improve in 2021.
The tensions within the balance of payments have thus eased compared to last year, and the central bank has comparatively smaller problems to mitigate in relation to the exchange rate. In turn, the energy prices resulted in the meantime in mounting inflationary pressures.
In a broader perspective, Georgia’s current account pattern of shrinkage, visible before the crisis, discontinued. Compared to similar periods of 2019 before the COVID-19 crisis, the country’s external balance measured by the CA deficit has, however, deteriorated: by 124% (from $170mn in Q2, 2019) in Q2 and by 80% (from $416mn in H1, 2019) in H2.
The tourism revenues, an important element of Georgia’s current account balance, have somehow improved from the nearly null and void outcome last year while remaining at very low levels com[ared to the previous years. Thus, the net income from travel soared 14 times y/y to $209mn in H1 and 3.4 times
26 GEORGIA Country Report December 2021 www.intellinews.com