Page 24 - GEORptNov19

The steady improvement in the country’s trade balance might encourage the central bank to avoid further monetary tightening. In September, the central bank hiked its policy rate to 7.5% in an unplanned meeting and released some $700mn by cutting the required reserves for foreign currency liabilities, in an attempt at addressing pressures causing a weakening of the GEL.
Q3 imports declined by 0.7% y/y—a more moderate correction compared to the 5.2% y/y contraction seen in Q2. Imports over the past 12 months ending September dropped by 1.3% y/y to $8.9bn.
Exports maintained robust growth of 10.6% y/y in Q3, roughly in line with the 10.3% y/y advance in Q2. Rolling 12-month exports rose by 12.1% y/y to $3.6bn—notably only a fraction of imports.
5.1.2​ Current account dynamics
Georgia’s current account deficit halves in Q1 on strong exports
Georgia’s current account (CA) deficit amounted to $227mn in the first quarter of 2019, 48% down y/y according to the central bank reporting under BPM5.​ The country's CA deficit narrowed in 2018 compared to 2017, but remains at a still high level of 7.7% of GDP ($1.24bn) and its dynamics depends to a large extent on the revenues generated by tourism.
Exports of goods increased by 12.5% y/y to $1.1bn, while imports of goods contracted by 3.3% y/y to $1.9bn. Notably, the balance of trade with goods improved despite the nominal and real strengthening of the local currency against a trade of currencies reflecting the country’s foreign trade, in the first quarter of this year compared to the same period of 2018.
The balance of goods remains the major contributor to the current account. Trade of goods deficit decreased, however, by 18.9% y/y and amounted to $799mn in the first quarter.
The positive balance of services (mostly due to exports of travel services) partially offsets the negative balance of goods. Exports of services increased by 3.4% and imports by 10.4%. The balance of travel services is the largest positive component of the services account. Export of travel services increased
24​ GEORGIA Country Report​ November 2019 ​ ​www.intellinews.com